How P2P lending is changing modern finance


So you want to try p2p lending maybe you’ve heard about the big platforms like ZOPA and Lending Club and how you can earn high interest rates without the volatility of the market You’re ready to dip your toes in but want to do more research. So what is p2p lending? Put simply, p2p lending is a way for borrowers to get loans without going through a bank or other institution. Instead, they go directly to the lenders through an online platform the big idea behind lending is passive returns. In the stock market, you or someone you pay needs to always have their eyes on the ticker and the markets. If you aren’t watching, the market can drop and you lose all your earnings. Lending is a much less volatile and often less risky way to make income off your savings You lend your money out to a borrower and then it’s their job to pay you the interest If they don’t pay up, they either must give up collateral or lose reputation But why get a loan from an internet platform over a bank? Well, there’s two reasons One is control. Banks make money by loaning out your money you keep in your savings account They can loan this money out to anyone who meets their requirements for whatever rate they think is necessary Generally, it’s substantially higher than what they will pay you. In the 1980s an American could park their savings in a bank CD account for six months at 15% interest As you might imagine most people were pretty happy with that Today, it’s maybe one point six percent P2P lets you take the controls into your own hands so you can start making reasonable earnings on your savings again On Constant you can make seven percent or more on fully collateralized loans. That’s more than 400% higher than the average CD rate for borrowers it lets them get loans without submitting to intrusive credit checks or having to give their life story to strangers just to get a loan. They can also use different collateral types like crypto
– for example – that banks won’t take. The second reason is flexibility. On many P2P platforms profits vary based on risk assessment Platforms will list borrowers as a low risk medium risk or high risk of default Low risk tends to get you rates like three to five percent while high risk starts putting you over ten percent Risk is assessed by platform metrics which can vary from personal bios to a full credit check These platforms have to give you high interest for high risk because if there’s a default there’s usually no collateral to back it up You can mitigate this risk by taking out many different loans and choosing based on your risk appetite But maybe you don’t want the risk. On Constant, we fixed the risk problem by making all borrowers put up collateral They can also select the interest rate they’re comfortable paying and try to match with an investor at the same rate No need to take out a ton of loans just to balance out defaults. There’s other benefits of a p2p platform working as an intermediary. Customers can do things like pay up early or sell their loan to another investor for smaller profits. It’s all automatic and it doesn’t require the same level of risk assessment He’s what you need to remember There is an element of risk attached to all investment opportunities and there are a couple things you should consider before you get involved First, the temptation to chase high-risk loans for high returns could leave you out of your money, especially on a platform that’s very user-friendly. That’s why diversifying your holdings is always key. Second, borrowers often favor p2p lending platforms because they can get a loan without having a good credit history or even collateral. It’s important to shop around and find a p2p lending platform that offers you the best security on your investment. You might want to give us a try. As one of the few fully secured P2P lending platforms Constance secures your loan with borrower collateral 150 percent of the loan amount in fact If borrowers default or their collateral loses value it’s sold to repay you few other lending platforms offer that level of security.

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