The face of the financial sector has transformed significantly with the emergence of thousands of cryptocurrencies. The financial sector, including, lending and borrowing, as well as, the payment mechanism as a whole has observed significant contrastive changes. The way people were involved in money borrowing and lending has changed since the emergence of cryptocurrency Peer to peer loans. Now, such loan mechanisms are providing equal benefits to both, the borrower and the lenders.
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Previously, the financial system was primarily owned by traditional banks. However, blockchain-based distributed ledger technology has now attracted scores of global investors, including, small-to-medium to large financial institutions, educational bodies, and other industries.
Such developments have skyrocketed this freshly-innovative ecosystem of payment, and the ensuing worldwide trading and investment mechanism. Now, people have started using various cryptocurrencies like Bitcoin, Litecoin, Ethereum and more for multiple purposes, among which, borrowing and lending take the forefront.
Read on to learn how you can invest, borrow and lend these digital coins and what are the best options available right now for crypto users.
Understanding Peer-to-Peer Lending
In 2021, the global cryptocurrency lending market size was recorded to hit a record equal of 5.84 billion USD. Moreover, the market is projected to reach a compound CAGR of 25.9% by 2030. These figures reflect how quickly people have started using this mode of payment and investment system; primarily because of the benefits it offers to users.
The advantages offered by blockchain-based crypto lending platforms such as easier, seamless and quicker loans, improved loan optimized processes, improved business efficiency, security, transparency, compliance with regulations and rules, and quicker decision making are expected to further the market growth to a level that is beyond our wildest dreams!
Why Digital P2P Loan Lending over Traditional?
In traditional lending systems, there are always chances of increased processing time and errors committed by people. This is primarily because there is always an undying need for physical interactions and human interventions at each step. Nonetheless, the chances of errors and other complications that come with it are slim when it comes to digital lending and borrowing. Primarily because everything takes place through a distributed ledger technology blockchain. Such technologies are capable of enabling users to securely process every aspect of their transactions. Interestingly, banks can also automate their whole lending system using digital platforms to improve user experience.
Peer-to-peer digital lending as the term implies can directly happen from a person to person without the need of any middle party, a mediator, or a third person. While opting to get a digital loan, borrowers don’t need to provide an in-person application to the facilitator, nor do they need to visit the physical franchise. Everything carried out online through a sophisticated technological forum called the blockchain. Currently, blockchain is using in several major online lenders, including LendingClub, Prosper, Solo, and others, to streamline their business operations. These platforms have commercialized the peer-to-peer concept, making borrowing and lending money using digital coins like Bitcoin, etc. more and more simplified.
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How Does P2P Lending Work?
Peer-to-peer lending and borrowing were initiated with the idea of connecting investors and borrowers directly without a need for an intermediator or third-party bank. P2P offered borrowers a better shot at keeping a track of their transactions disabling the aftermath of the 2008 financial downtime when traditional banks’ requirements tightened especially for those with low credit scores.
Furthermore, as for the P2P loan lending process, borrowers will more or less follow the same process as they would for getting an online P2P loan. Institutional and retail P2P Loan lending platforms check eligibility via pre-qualification. The pre-qualification phase enables you to select a loan amount while letting you define the purpose. For accomplishing the pre-qualification phase, users need to provide information such as their name, address, date of birth, etc.
After sharing your information, you can check the loan terms and the annual percentage you could be eligible for. You might consider confirming additional factors including your credit history and credit score as well.
Top P2P Lending Platform for Ultimate Benefits
Various cryptocurrency lending service providers are offering loan services to users globally. However, choosing the best one can be a daunting task for those unaware of the intricacies behind this concept. Nevertheless, there still are a few leading digital lending platforms that you might consider when you decide to borrow a loan next time.
With a rating of 3.42, Prosper is one of the most widely used lending platforms people consider among all. As a peer lender, Prosper offers its users a broad array of loan amounts. The platform is significantly great for debt consolidation with an extensive debt-to-income (DTI) ratio cap of 50%. The company takes up to 4 to 5 working days to get your funds. However, the fees might be a bit higher than other digital lenders working in the industry.
- Fair credit OK.
- DTI rates of up to 50%.
- No hard credit checks for preapproval.
- Higher APR of 35.99%.
- Turnaround up to 5 working days.
- Users must have three open credit accounts to qualify for the loans.
With a rating of 3.6, LendingClub is another leading crypto lender and one of the most well-recognized peer-to-peer lending sites. The platform offers a broad array of financing and borrowing options including business loans, personal loans, car loans and more. LendingClub has fairly high starting origination fees and interest rates in contrast with other peer lending service providers.
- High Trustpilot rating.
- Co-applicants welcome.
- For auto refinancing, low starting APR of 3.99%.
- Not available in every state.
- Turnaround around 15 working days.
With a fixed interest rate, the SoLo was built to become a leading inexpensive alternative to payday loans for users. SoLo users – instead of fees, can fund small loans up to 500 USD in exchange for an optional tip. Users can also obtain their funds within two working days once they make a request.
- Bad credit OK.
- The lower amount of loans.
- Optional tip at around 10%.
- Turnaround minimum to a maximum of 15 days.
- With a past charge-off, difficult to qualify.
Summing It Up
The list of best P2P Loan platforms doesn’t end here. There are many other leading lenders globally such as Peerform, Funding Circle, Payoff, and more that users may consider borrowing loans with low-interest rates and timely delivery. In essence, the emergence of cryptocurrency has opened the door for different players, and stakeholders, if you may, in the financial industry, vying to yield favorable results as per their preferences. Working with trusted P2P lending platforms can help people keep track of their transactions, anywhere, anytime.