Peer-to-Peer(P2P) Lending: Definition, Types, Platforms

Investors and borrowers are shifting to peer to peer lending now more than ever. This is largely thanks to its flexibility and potential for steady, sizable returns. However, there are many types of peer to peer lending so it’s useful to understand the basics before you invest for the first time.

Defining peer to peer lending

Is P2P lending a good investment?

For investors

P2P lending allows you to diversify your investments and secure steady and sustainable returns that exceed traditional low-risk options. Many platforms let you spread your risk exposure as well as letting you choose individual borrowers, contribute smaller amounts to multiple loans, or take out a portion of a larger loan.

For borrowers

P2P loans can be funded quickly with little paperwork or red tape. While some banks might take a month to pay your loan, some P2P lending platforms approve and credit your account in minutes. They’re also a great alternative if you have a low credit score. They often use different methods for accessing creditworthiness and might give you a better rate.

How to make money with different types of peer to peer lending?
How to make money with different types of peer to peer lending?
How to make money with different types of peer to peer lending? It’s all about diversification — putting your funds into different pots, or in peer-to-peer lending, different loans (source: techcrunch.com)

Types of peer to peer lending platforms

Traditional peer to peer platforms

When P2P lending first became popular, its biggest selling point was fast loans for borrowers — especially if they didn’t qualify for loans from other financial institutions. If borrowers seemed untrustworthy, platforms would charge interest rates as high as 35% and throw them on the market.

The solution: Collateral-backed P2P platforms

As the peer to peer marketplace expands, new lending platforms are emerging to solve the uncollateralized loan problem.

Crowdlending P2P platforms

Besides collateral-backed platforms, a growing number of P2P lending platforms are switching to a crowdlending model.

Since property and other illiquid assets can take years to sell, collateralized peer-to-peer lending platforms work better
Since property and other illiquid assets can take years to sell, collateralized peer-to-peer lending platforms work better
Since property and other illiquid assets can take years to sell, collateralized peer-to-peer lending platforms work better with liquid assets like cryptocurrencies (source: p2pempire.com)

Get great rates, instant matches, and 24/7 customer service all on one P2P platform

On MyConstant, you can use USD or cryptocurrency for loans and investments. All loans are collateralized, so are less risky than unsecured loans.

MyConstant makes it easy to invest your money in peer-to-peer lending in a few different ways with very low risk
MyConstant makes it easy to invest your money in peer-to-peer lending in a few different ways with very low risk
MyConstant makes it easy to invest your money in peer-to-peer lending in a few different ways with very low risk

Flex

MyConstant’s Flex account helps you earn through decentralized lending and liquidity pools. Once you deposit money into the account, MyConstant will lend to borrowers for you and you get to keep the interest as your return on investment. You don’t have to worry about any fees — including withdrawal fees — and get 4% APY compounded every second.

Crypto-Backed

MyConstant crypto-backed loans connect you with crypto borrowers. Choose your rate and terms and get matched with a borrower instantly. All loans are collateralized, so there’s very little risk of default and you get up to 7% APR on a 6-month loan.

Crypto Lend

Put your cryptocurrency to use. Invest Bitcoin and other popular cryptocurrencies with MyConstant’s crypto lending product and earn up to 9% APY. Interest is compounded and paid every second, so you can always see your investment grow and withdraw at any time.

Peer-to-peer lending built on peer-to-peer technology. Refer & Earn $10 myconstant.com/referral | Website myconstant.com