There are two approaches to the concept of peer to peer lending (P2P Lending), that is as a borrower or investor.
Both roles will provide benefits for you in financial terms. Indeed, this system is not without risk, just like other financial activities. You still have to be careful in carrying it out. According to investopedia.com, P2P Lending lifts returns for people who supply capital and decreases financing costs for the individuals who use it. On the other hand, it requests additional time and exertion from them and involves more hazard.
However, as long as you understand how the system works, you will be fine.
Check out some advantages and disadvantages using P2P Lending:
As a borrower
Advantages
For the borrower, one of the biggest benefits of P2P Lending is the low-interest rate compared to the interest rate set by official financial institutions.
Conversely, a personal loan may have an interest rate of 12-20% from a financial institution, which is still lower than a credit card bill. While loans from P2P Lending have lower interest rates.
Another advantage is that the loan application process is not as formal when applying for loans at financial institutions.The process is much faster and easier. In addition, you do not need excessive conditions that must be met so that your loan is approved.
In addition, you can also apply for a loan for any purpose or reason as long as someone will invest the money.
Finally, P2P Lending is a loan without collateral, which means that no guarantee is needed at all.
Disadvantages
The P2P Lending loan interest rate jumps up when your creditworthiness falls. If you pay late, the bill will be very significant.
The loans are only suitable for the short term, because the longer the loan period, the bills will continue to rise. It is possible that your loan funding needs can be met as a whole, but there is no guarantee that all loan application submissions will be fulfilled.
As Investors
Advantages
Providing loans is very easy and fast, especially if you have more funds but don’t know where to allocate. The loan interest rate received has a significant value and profitable.
Providing loans through the P2P Lending system also makes it easier for you to diversify your investment, thereby increasing the opportunity to reap greater profits.
Disadvantages
If you invest money through P2P Lending, you cannot withdraw the money you invest whenever you want. It is not like depositing money into a bank.
It is possible that the borrower will fail to repay the loan, so the funds you lend can disappear.
However, this has been overcome by the majority of the Peer to Peer Lending platform with guarantees given to you as lenders.
Read more: Everything You Need to Know About Peer to Peer Lending (P2P Lending)
