Category Archives: Oregon best payday loans

Peer-To-Peer Financing

The peer-to-peer economy has revolutionized the way people do business, and the financial sector has seen some impressive advancements leveraging P2P applications. One of the most used applications is microlending or microcredit. Microloans are small loans that are issued by individuals rather than banks or credit unions. These loans can be issued by a single individual or aggregated across a number of individuals who each contribute a portion of the total amount. ? ?

Often, microloans are given to people in Third World countries, where traditional financing is not available, to help them start small businesses. Lenders receive interest on their loans and repayment of principal once the loan has matured. Because the credit of these borrowers may be quite low and the risk of default high, microloans command above-market interest rates making them enticing for some investors. ? ?

Microlending Risk and Reward

Microlending has been facilitated by the rise of the internet and the worldwide interconnectivity that it brings. People who wish to put their savings to use by lending and those who seek to borrow can find each other online and transact.

The credit rating of borrowers is imputed using data (including whether or not the borrower owns a home), a credit check or background check, and repayment history if the borrower has participated in microloans in the past. Even those with excellent credit scores can expect to pay slightly more than traditional credit. As a result, lenders may earn a better return than through traditional savings or CDs.

Because these loans are not typically backed by any sort of collateral, if a borrower defaults, the lender may expect little or nothing to be recovered. On Prosper, the best-rated borrower can expect to pay a minimum of 6% annually on a loan, and the riskiest borrower will pay an interest rate of up to 31.9%. ? ?If an investor thinks that 6% for a relatively safe loan is worth the risk, the loan may produce outsized returns compared to other forms of lending. Read More