It is so ironic that on one hand credit has increased our standard of living and our lifestyle continues to become more demanding and costly but the process of getting a personal loans is getting harder day-by-day. People with 'just good enough' credit, no credit history at all, or those who don't fit a standardized category, are sidelined from the formal lending system as if their financial needs do not matter.
This and many other problems are getting fixed with the launch of peer-to-peer lending platforms and they've done so by their out of the box approach of providing alternate but reliable financing options.
For years, banks and/or credit unions have been our first go-to institutions when it comes to loans, mortgage, or simply when we want to open a credit, savings or checking account. However, banks have made it harder for people to keep their finances balanced.
Not only that, taking a personal loan in a bank can sometime take a couple of weeks, the credit checks affect your credit score for future transactions and more often than not, the interest rates will leave big holes in your pockets.
However, let's look at the big picture: there's a big difference between the costs and energy a bank spends on your loan approval vs what a peer-to-peer lending platform will spend. Banks have to cover a wide range of costs from the simple paperwork involved in the loan transactions to the high-paying employees all the way to the bank's infrastructure costs.
A peer-to-peer lending platform will invest less than half of what a bank will invest yearly in all such things. Therefore, lending platforms are able to help those who can't afford the interest rates and costs of borrowing money from a bank.
Let's move on to another issue: in banks, borrowers need to fit standardized requirements and categories in order to be considered for a loan. Most of the time, this excludes more than 50% of the population that needs the money and is also able to pay it back on time. However, these people are denied the loans because of the conservative approach of banks.
P2P lending platforms take a closer and more holistic look at the profile of each borrower and investor to make the right match. In Lendbox, borrowers have the benefit of being seen as an individual instead of being seen as a category on a list or a score on a paper.
Benefits of Peer-to-Peer Lending (P2P Lending) using Lendbox
Lendbox, like any other peer-to-peer lending platform consists of two sides of the coin, the borrowers and the investors. To effectively mention and cover the benefits of joining Lendbox, we need to talk about the benefits our platform presents to each side separately.
Benefits of P2P Lending for Investors
1. No middleman = more money. Unlike banks, we won't decide for you how much you want to earn and who you want to lend your money to. The interest rates and amount are agreed upon directly between borrowers and investors.
2. Stability. The risk of investing in other investment options such as equity markets is much higher than investing in peer-to-peer platforms. P2P lending is a much safer and minimal risk alternative.
3. A steady source of passive income. A passive income is one wherein you don't have to put any effort in generating it. It comes to you on a regular basis and you either re-invest it, save it, or use it. When you begin to receive the payments of your loans, you will be generating a passive income depending on the interest rates you settled with your borrower
4. Leave your mark on someone's life. Most of the borrowers on Lendbox have run out of options or simply can't afford a loan at a bank, but they all have real needs that have to be taken care of. Aside from providing yourself with a secure income and investment options, you'll be affecting someone else's life in a positive and empowering way
Benefits of P2P Lending for Borrowers
1. No middleman = more flexibility and low costs. You will directly negotiate and agree with your prospective investor about terms of loan. Instead of being forced to accept certain conditions, you get to choose who you want to transact with and at what terms.
Alternatively, Lendbox doesn't settle with a simple credit score from the bureau and standardized categories when it comes to a borrower's eligibility for a loan so you have much higher chances of getting a loan with nominal interest rates based on your credit risk profile.
2. Fixed rates. Once you settle on an interest rate with your lender, this rate won't randomly change, making it impossible for you to pay. This might lead to defaults on your payments in which case a penal interest rate will be applied too. You can better plan your Cash Flows as per your selected terms.
3. No pre-payment fees. If you choose to fully pay your loan early, there won't be a penalty fee for forclosure.