New Chapter Of Banking: Peer-To-Peer Lending

Nowadays, the spotless reputation of banks is in the phase of decrease. Hence, we are offered with something different – P2P (peer-to-peer) online platforms. The generation of “online people” seek an alternative to the traditional banking, aiming at better offers and conditions.

Lending platforms, by the means of online auctions match borrowers with lenders and create a much more convenient way to cooperate. The offered loans usually include a few “slices” taken from more than one lender which makes the deal they sell much more beneficial for both sides than in the case of traditional banking – for instance, the British P2P platform Zopa gives 4.9% to lenders and their personal loans are charged with 5.6%.

While interest rates are extremely low and people lose their confidence in banks, P2P is becoming more and more popular in many countries – the American leaders in the trade, Lending Club and Prosper, own 98% of the market. This phenomena appears to be the natural consequence of the growing access to e-commerce which wins in one of the most significant area – it allows to lower the costs of running the business, even three times.

The next advantage of P2P lending is the fact that it has the power to remove the mismatch present between long-term loans and short term deposit. The only obstacle is to gain trust of the new clients who are used to the traditional banking and would not be eager to invest money in something that they have never heard before.

Worries are undeniably legitimate since all investments involve some risk. What are the main dangers? First of all, it is a platform’s bankruptcy and the threat of losing all money. Apart from that, unlike traditional banks, P2P does not offer any state-backed guarantees which protect your money.

The next problem with P2P is its transnationality. A huge number of foreign investors are attracted to the American market. The fact that it collects money from foreign lenders as well, make any legal problems which occur in this “mixture” unsolvable.

New regulations are to help remove the high risk from P2P businesses through demanding such organization of the firm’s capital which will ensure the money left for remaining loans in case of closing. When it comes to the insurance, for example Zopa and other British firms offer “provision funds” which are to provide help for loans in case of problems. Meanwhile, there are some discussions going on concerning more insurance options.

The majority of money in the American platform – Lending Club – belongs to the wealthy individuals and institution, the rest comprises retail investors. For now, all savers have the same conditions and opportunities, however, some people maintain that it is the matter of time when big investors start to command the market.

Peer-to-peer lending is still developing and with the time passing, it surely will become much more popular. Certain pivotal improvements should help gain more interest and trust among customers. Whether it succeeds or not, depends on the effective marketing, good management and cooperation with the big companies.

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Introduction to Student Loans: Whare are Pros and Cons?


Being a US student will require you a lot of investment and many times you won’t be able to afford to study without getting a loan. That’s why you should always consider getting a student loan as it can indeed help you relieve the financial pressure.

But what are the pros and cons of student loans?

Let’s find that out!

Student loan pros

Student loans are very helpful for most students mainly because they offer immediate financial aid and they can help you get past any financial trouble. There are many reasons why student loans are a great option, as you can see below:

  • With a student loan, you will be able to afford any type of college, even if your parents might not have the money to pay for it.
  • You can eliminate other financial obligations a lot faster. With their help, you can focus on repaying your college debt without having to worry about any other debts.
  • If you do have a poor credit score, the student loans will allow you to improve it. Most of these loans are handed even to the students with a poor credit and if you use them properly you can indeed get away from poor credit situations.
  • A student loan will help you get the education you want even if you have no income of your own. They can be repaid by your parents or tutor and you can still get the education you want without any restrictions.
  • You can repay the loan on a monthly basis. You don’t have to worry about giving all that money back at once, basically, you have less pressure to deal with so you can focus on your studies.

Student loan cons

Obviously, acquiring a student loan does come with its own set of downsides. While you can get them fast, you do need to be very consistent with your payments otherwise you can easily get into financial trouble. Here are some of the student loan downsides:

  • These loans will never go away even if you file for bankruptcy. Not only that but while you can defer loan you can’t just ignore them as you will end up reaching court and repay a much larger amount.
  • The student loans come with a high-interest rate that only gets higher if you have a low credit score. Sure, they seem appealing at first but these high-interest rates can be a huge downside for many students.
  • Once you get a student loan, you will have to repay it in the designated amount of time. If you don’t do that, this loan will keep you away from accomplishing financial milestones and goals. it can increase your mortgage rate; it will haunt even your retirement if you don’t get rid of it properly.
  • While there is a student loan forgiveness program, not everyone qualifies. In fact, it can be really hard to qualify for that type of program which only manages to make everything a lot more difficult.
  • These loans come with a high risk because even if you contract such a loan you can’t be certain that the education you get can be a very good one. That’s because some of the private educational institutions won’t offer you the ultimate value for your money.

If you do want to get a student loan, it’s a very good idea to put both the pros and cons in the balance.

READ NOW: Guide To Peer To Peer Lending For Bad Credit

This is a major financial commitment so you have to think about it as much as you can. Take your time, study all opportunities and the results can be very well worth it!

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