Paradigm: a distinct set of basic assumptions, concepts, ways of thinking and methodologies that are shared by a group.
Today, it is only natural to turn to an online lending platform, such as Peerform, when you need a loan. Peer-to-peer lending has become the norm. In a world that is digital, walking into a bank during their business hours to meet with a loan officer has become the stuff of history. But it was not always this way.
Back to the Future
Actually, peer-to-peer lending is an ancient concept that fits perfectly into our modern digital world. The first loans were between people. Historical evidence can trace the existence of lending back as far as the Roman era, but we know from anecdotal evidence that a lively lending business existed much earlier. As the Industrial Age emerged and strengthened, formal institutions sprung up and lending became less and less about people giving to people. Online lending, or marketplace lending as it is also called, is in essence a return to the old ways of connecting people to people.
Peer to peer is a platform that connects investors to people who need loans. The peer-to-peer industry has become such a huge success, that it is now also a favorite of institutional investors. But the founding mission has not changed: peer to peer is for the benefit of consumers who would be otherwise unable to access much needed financing from traditional lenders.
As the Internet emerged so did Online Lending
The earliest example of online lending took place around the mid-1980s, when the internet was still in its infancy. A company called Quicken Loans sought to shorten the length of time it took from loan application to approval by moving everything from paper files to digital files. But, since the internet craze had yet to hit, the platform had its limitations. First Internet Bank became the initial institution to offer an online platform for applying for loans, obviating consumers of the need to visit the physical retail site. It was not meant to replace banks, but it did result in encouraging other banks to add online services if they wanted to remain competitive.
The first online lending platform was founded in 2005 in the United Kingdom. America followed suit a year later, with its first launch of a peer-to-peer platform in 2006. Almost immediately online lenders began to proliferate around the country and the world. Today, one can find a thriving online lending industry in just about every nation across the globe, even in developing nations, where consumers, thanks to p2p platforms, now have access to much needed cash in a timely, easy, and safe manner. In many regions of the world, the success of the online lending industry has contributed to economic parity and an opportunity to move out of poverty.
Following on the heels of online lending for individuals, new peer-to-peer companies were founded to offer loans for small businesses. Peer to peer small business loans are perfect for small business owners who typically do not have the financial track record banks require. Online lenders use other data to determine the credit-worthiness of the small business such as records from online retailers, company checking accounts and payment processors.
Why has Online Lending Become So Successful?
The financial meltdown of 2008-09 served to feed the nascent online lending industry. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act which added even more restrictions to consumer lending. Quickly accessing affordable loans became difficult even for consumers with “good” credit and impossible for those with credit score issues. The market crash and other financial challenges faced by banks resulted in considerable tightening of lending practices. With the majority of consumers facing their own financial struggles, not very many fit within the strict guidelines for bank loans. A potential borrower with a less than stellar credit score would have little success in obtaining an unsecured loan. Or, the loan would come with significant requirements, restrictions and higher interest rates and fees.
The time consuming, rigid and lengthy procedures imposed by banks on borrowers enabled the rise of the new online lending platform, seeding the ground for one of the fastest growing segments of the financial industry.
The World is Online
We have become a global community of online consumers. Practically all facets of our lives are conducted online: social interactions and communications, shopping, researching, paying bills, budgeting and tracking money, travel, sharing…the list is endless. Online technology is leaping forward with new platforms and apps just about every day. The trend is irreversible. As online lending platforms continue to become more visible and reliable around the world, the global consumer base will strengthen and grow, leading to exponential growth in the peer-to-peer lending industry. In fact a Foundation Capital report on marketplace lending predicts that online lenders will generate $1 trillion in loans, per year, by 2025. The proliferation and success of the online lending industry means that “As a result, lenders and borrowers can now find one another and agree to terms all without the involvement of retail banks and or credit card companies.”
Ease and Speed
The online lending platform is accessible, 24 hours a day, every day of the week. The loan application is online, easy to complete and the response is quick. These aspects fit perfectly to the needs of consumers today who are very busy, juggling multiple projects, are digitally connected and pressed for time. The unique algorithms that peer-to-peer lenders use results in a more fair evaluation of a borrower’s capacity to repay the loan. A peer-to-peer loan is available for a wide variety of financing needs. For instance, Peerform offers loans to cover the costs of a wedding, renovate a bathroom, make a move across the country for a better job, or pay for uncovered medical expenses. For consumers drowning in debt, quick access to a debt consolidation loan means that they can get back on their feet and begin rebuilding their credit.
An online loan is the best way to get the cash you need quickly so you can move forward with your life’s goals.