There are many situations for Americans in which there is a need for money as soon as possible. Urgent loans or consumer loans are often a solution that many Americans take on in order for them to avoid having to default on payments, to access emergency funds when required and more. The problem with many of these consumer loans through financial institutions is that they come with extensive interest charges.
Through peer to peer lending however many of these interest charges are starting to fall away. Private investors are now interested in investing their money into peer-to-peer lending and offering US consumer loans in a fast and easy solution for borrowers.
For borrowers this represents an easy and safe way to access money at much lower interest rates than a traditional lender. For investors it represents the opportunity to make a return on investment that’s considerably higher than playing the stock market, investing in mutual funds and more. Even asking for a moderate interest rate of around 8 to 10% is still half of the interest many financial institutions would charge for an emergency loan.
Where did P2P lending come from?
Peer-to-peer lending in this industry first began in the year 2005, this year it is set to skyrocket into over $30 billion in loans issued through a variety of different P2P platforms. Today it’s possible to sign up and start investing your money over the Internet using P2P systems which offer excellent rate of returns. The outlook is continuing to look promising for both investors and borrowers with more and more platforms continuing to expand.
The outlook moving forward:
In the past year P2P lending has doubled with its investment size in the United States. Peer-to-peer companies gained an extensive amount of traction in the marketplace in the year 2008 during the financial crisis because many banks refused to increase loan portfolios. With many private investors offering loans and discounts this would cause a number of borrowers to now pivot and utilize only P2P lending.
Monetary policy is dictated by the US Federal Reserve is also changing as our interest rates. Loans for households and businesses in the United States have a definite edge when compared to loans in other parts of the world such as Europe and Asia where central banks work to control a close to zero rate policy.
Interest rates for P2P lending in the United States right now range from 5.6% interest up to 35.8% interest depending on the total term of the loan and the risk for lending to a particular borrower. Some of the default rates will add an additional 1.5% to 10% for borrowers who are of a higher risk.
P2P lending is also working to expand jobs in the United States with many creditors expanding their portfolios to include P2P lending for car loans, home market loans, and emergency loans through the internet.
According to the most recent estimates, consumer lending in US will keep rising for the rest of 2017.
As more borrowers continue to adopt this lending strategy for everyday purchases modern technology will also continue to scale. There are many mobile applications now or you can download a full application on your smartphone and apply for new loans through the app in just a few minutes. This level of convenience and a more receptive borrower could ensure that many more investors will have the chance to earn using P2P lending.