Peer-to-peer lending is a form of crowdfunding. Crowdfunding is usually associated with rewards based crowdfunding, where you pre-buy a product, or equity crowdfunding, where you receive shares in a company. In contrast, peer-to-peer lending investors lend money by investing in loans and then receive a monthly repayment of capital and interest. Investors should be aware that there is risk associated with all three of these crowdfunding models. Why is peer-to-peer lending the best option for you.
#1. Better Returns
One of the main reasons for investing through peer-to-peer lending is the interest rate. With bank saving rates at rock bottom investors in peer-to-peer lending can achieve higher interest rates by lending their cash through peer-to-peer lending platforms. For instance, some lenders rate of returns start at 5.95% and can go as high as 12.25% depending on the risk level you want to lend at, making it a very interesting proposition for potential investors.
#2. Strict Credit Checks
Peer-to-peer lending platforms, unlike the other forms of crowdfunding have strict credit checks in place and every company or individual who is applying for a loan has to pass these before they are eligible. In the case of LendingCrowd, a peer-to-peer lender specialising in small business loans, an investor is investing in established businesses or sole traders that have passed robust credit checks.
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