Financial institutions are encountering many problems because of the rising inflation rates in the country. The current inflation rate has reached a historical high of around 8%, making it difficult for banks to cope with the problem. It also makes it hard for consumers to make investments and asset purchases this year.
Home prices skyrocket, cars cost $47,000 on average, and groceries cost more than ever. So ultimately, people have to rely on loans to purchase big items. Thankfully, taking a loan during a time with high inflation rates is favorable for the borrowers. This is because the loan value will depreciate slower than the inflation rate. In other words, the purchasing power of the loan increases over time.
Moreover, P2P lending is making it much easier for people to get loans during these tough economic times. P2P lending platforms offer lower interest rates than banks, making it easier for borrowers to repay their loans.
What is P2P Lending?
P2P lending is a type of loan offered by individuals or groups of individuals rather than financial institutions. The loans are usually unsecured, so they don’t require any collateral. P2P lending platforms connect borrowers with investors who are willing to lend them money.
The popularity of P2P lending has grown significantly in recent years. This is because P2P lending offers several advantages over traditional loans from banks.
Here are some reasons why P2P lending will take over the lending market.
It’s is Faster
Getting a loan means going through a lengthy and complicated process. You first have to fill out a loan application and then wait for the bank to approve it. It can take weeks or even months.
P2P lending is much faster because you can get approved for a loan in just a few days. It’s because investors rather than banks make the decision. Moreover, some options can make the process a lot faster. For example, push-to-card options can send the loan amount to your debit card within minutes. It’s a new and efficient way for people to make emergency loans.
The long waiting for bank loans means that people often miss out on opportunities. With P2P lending, you can get the money you need quickly to don’t have to worry about missing out. It’s also good for emergencies.
It’s More Accessible
The banks have strict eligibility criteria for loans, which means that not everyone can qualify for them. This is especially true for small businesses and people with bad credit.
P2P lending platforms, on the other hand, are much more accessible. It’s because many different types of investors are willing to lend money. Some platforms even allow you to get a loan with no credit score. It might be riskier for those lending money, but it’s an excellent way for them to help people.
It’s More Transparent
The terms of traditional loans are often unfair to borrowers. Banks tend to have fees and hidden costs that can add up quickly. These fees make it difficult to understand the actual cost of the loan.
P2P lending is much more transparent because the investors set the terms. This means that there are no hidden fees or charges. You will know exactly how much you need to repay and when to repay it.
It’s More Flexible
Traditional loans often come with inflexible repayment terms. Banks want to minimize their risk by reducing that risk by having fixed repayment terms. As a result, borrowers usually have to make fixed monthly payments, regardless of their financial situation.
P2P lending is much more flexible because the investors set the repayment terms. This means that you can choose a repayment schedule that suits your needs. For example, you can decide to make smaller payments over a longer period if you are struggling financially.
Traditional loans often have high-interest rates, which can make them very expensive. This is because banks need to profit from the loans they give out. P2P lending platforms, on the other hand, are much cheaper.
The investors set interest rates, and because quantity over quality is the way to profit from P2P lending platforms, they offer lesser interest rates to their clients. They are usually lower than the interest rates offered by banks. As a result, borrowers can save a lot of money on their loans.
P2P lending is an excellent alternative to traditional loans from banks. It’s faster, more accessible, transparent, flexible, and cheaper. Because of these reasons, P2P might become the mainstream form of lending in the future.