Why so many people now invest in peer-to-peer loans

On Behalf of | Jul 1, 2020 | Business Law |

Proactive investors consistently seek out new investment vehicles to profit from. One tool that continues to gain momentum us investing in online lending opportunities and small business loans. Obtaining small business loans from traditional banks has always been difficult, so more small business owners than ever now rely on online banks to serve them.

In 2015, NerdWallet announced that Lending Club finally began to accept investors from Arizona. These investors could participate in the company’s marketplace that matched them with potential borrowers. It provided an interesting opportunity for investors to diversify their portfolios.

Why business owners like peer-to-peer lending

Many business owners prefer Lending Club because they usually service loans a lot faster than traditional lenders. In fact, this remains true of most online lenders in the market, with some promising to process and fund loans in as little as 24 hours. One of the factors that Lending Club used to set itself apart at the time is that it also partnered with organizations to help serve underserved entrepreneurs who had a difficult time getting loans in California.

Why investors like peer-to-peer lending

Lending Club is one of just many peer-to-peer lenders that investors can look into. Forbes notes that to make the borrow-to-lender match possible, these platforms rely heavily on algorithms. Forbes also notes that these investment vehicles tend to experience much less volatility than the stock markets and sometimes offer higher returns.

While it listed Lending Club among the top peer-to-peer lenders, there were several others it felt investors might want to look into. Thee included Upstart, Prosper and Funding Circle. Regardless of what route investors plan to take, peer-to-peer lending might present an interesting business opportunity.