Marketplace lenders, also known as p2p lenders, are the next generation of financiers. Beginning in 2006, online lenders began to proliferate across the global financial world, radically altering the way consumers access loans. In 2014, American Banker named marketplace lending as the innovation of the year.
From humble beginnings, the online lending industry rose to respond to the need of consumers for access to financing. Banks, the traditional lenders, were no longer an option for increasing numbers of Americans. Far from being a momentary fad, online lending grew to a $26.16 billion industry in 2015. A Transparency Market research report predicts that the global marketplace lending industry will reach more than $897 billion by 2024.
Here is a nutshell overview of why online lending is the preferred channel for a global consumer audience.
Quick approval. The p2p loan platform is online, meaning that it is always open. Once you have completed the online application, you will find out almost immediately if you are approved or not and how much money you can borrow. At this time you will also learn what will be the amount of your automatic payments. Banks do have online applications now, as they have placed more and more of their services online. But, there is a much longer waiting period and you may even be required to visit the bank branch to complete the process. When you need a modest loan for debt consolidation, weddings or home improvement, an online lender is a much better resource than the bank.
Always open. Online lenders come to you, wherever you are. Night owls, early risers, busy parents, employees swamped with work—everyone is accommodated by the online lender. No branch hours to deal with, no fighting traffic, no need to take off from work. With more and more aspects of our lives becoming digitized, it only makes sense that loans should be handled online.
Better rates. Online loans come with lower interest rates and smaller service fees. Why? Online lenders, such as Peerform, have much lower overhead. They don’t have a bricks and mortar presence, which means that operating costs are low. These savings are passed on to the consumer and translates into lower fees.
Easier to be approved. A bank loan is an option if you have excellent credit or a co-signer. But if you are just now building your credit, or your credit score is suffering from some financial setbacks, a bank will not approve your application, or the interest rate will be exorbitantly high, and you will need a co-signer. Online lenders use different algorithms to determine your ability to repay the loan. At Peerform, we use the Peerform analyzer, a unique algorithm we developed that assesses a number of additional factors, in addition to your FICO, to determine your ability to repay the loan. Online lenders want to help consumers obtain the financing they need so they can move forward with meeting their financial goals.
Online loans can repair your credit. Your loan repayments are automatically deducted from your bank account which means that even if you are not the best at setting a defined bill-paying schedule, your p2p loan payments will be on time. This record of paying on time will be reflected in your credit score, meaning that online lenders help you to repair your credit and raise your score. A good credit score impacts more than lending. Employers, landlords, insurance companies and other vendors look at your credit score when evaluating your applications.