Peer to Peer Lending: Financing for the New Millennium

Peer to Peer Lending, or P2P Lending, is a new millennium concept designed to give people the ability to lend and borrow money with other individuals online. Using the Internet as its medium, what started as a retail phenomenon soon chartered into unknown territories and sparked a new wave of innovative ways to use alternative lending. As various industries have begun to assimilate and converge into the new world of marketplace lending, we have seen alternative lending take on the form of payday and student loans, leasing and factoring, as well as commercial and real estate loans.

Related Article: Why Patch of Land Chose Real Estate Debt Crowdfunding

Advantages for Borrowers

The popularity of P2P lending quickly spread once people began to realize the advantages it has over traditional hard money lenders. One of the advantages for borrowers is having direct access to a large pool of capital without having to go through an institutional investor, or find a private source of funding. Alternative lenders are able to approve loans with less red tape, restrictions, and guidelines than traditional lenders. The lack of overregulation allows the loan process to move forward with a higher sense of urgency and in a more streamlined process. The savings in overhead for an alternative lender translate into highly competitive interest rates compared to their counterparts. Patch of Land also has the added advantage of prefunded real estate development loans. As a result, real estate developers are able to receive direct financing from Patch of Land fast enough to secure the property and start working on their rehabilitation without having to wait for the crowd to fully fund their projects.

How It Works for Borrowers: Alternative Lending with Patch of Land

Advantages for Lenders

There are numerous advantages for P2P investors looking to join in the crowdlending movement. One of those advantages is the ability for an investor to participate in a new asset class. For example, an investor might choose to sign up to a real estate debt crowdfunding platform like Patch of Land and invest in a real estate project. By doing so they can diversify their portfolio with a passive income stream and become a national real estate investor in a residential property. Short-term loans are a positive investment that provides the benefit of lower interest rate risk and the ease of calculating your return. Overall, P2P investors are able to recognize higher returns than they would if they placed their money into a savings account, and will experience less volatility than playing the stock market.

How It Works for Investors: Diversify Your Portfolio with Patch of Land

Risk & Due Diligence

Of course with any investment there is always risk involved. P2P lending companies have done their best to create a marketplace that promotes complete transparency of their offerings. By divulging all pertinent information, investors can evaluate the proper documentation and perform their own due diligence before investing a cent of their money. In order to maintain complete transparency, safety, and security, Patch of Land implements a sophisticated underwriting and due diligence engine with a ‘Makes Sense’ underwriting approach which takes into account a variety of factors outside of what the borrower’s FICO score might tell us.

Networking & Social Presence

As people become more educated and learn about the numerous benefits associated with P2P lending, they will almost assuredly be inclined to partake in the latest trend. So far the alternative lending movement has led to over $1B in P2P personal loans, and continues to revolutionize different industries around the world. Part of the mainstream appeal evolves around the fact that P2P lending gives investors more options to invest in an idea or cause they find worthy of their time and money. For example, Patch of Land specializes in building wealth for investors through online real estate investments with an underlying focus on revitalizing neighborhoods and growing communities throughout America, giving people an outlet to make a sound investment with a positive purpose.

With so much popularity, it’s inevitable that we’ll see more government involvement through the JOBS Act and other legislature. It will be important for American citizens to discover what rules and regulations are currently being enforced, and the future considerations being discussed in Congress. For more information we encourage you to look through our FAQ section and view our Building Knowledge YouTube Educational Series.