Among the fintech innovations, peer to peer lending has done the most for consumers with bad credit, no credit and those underserved by traditional lenders.
Fintech innovations have without a doubt been the major disrupter of the global financial industry. Peer-to-peer lending, also known as marketplace lending has been one of the fastest growing segments of the financial industry. It quickly took its place as a major player in the fintech field.
For consumers with bad credit scores, or no credit score, the peer-to-peer lending industry has been their ticket to financial freedom. However, peer-to-peer lending platforms have become popular even with consumers who would easily qualify for a bank loan. Why? Peer-to-peer lenders are online.
We Live in a Digital World
The global consumer market has become incredibly digitized. We do just everything online today. The idea of conforming your day to visit the bank during their office hours, meet with a loan officer, fill out a lot of paperwork and then wait for an answer is passé.
The online presence of peer-to-peer lending platforms means that you can access the site whenever you want. You can easily fill out the application, and get a reply in a short amount of time. All you need is your digital device and it does not matter if you are in bed or waiting in the ski lift line.
Peer-to-Peer Lending is Easy and Quick
The process of applying for a peer-to-peer loan is easy, there are no hidden fees or rules. And if your credit score is not so great, you can still qualify for a peer-to-peer loan. Lenders utilize a different algorithm for determining if a person is a good credit risk or not.
Peer-to-peer lending is faster, cheaper, and much easier to navigate than banks. Loan payments are made automatically, through direct withdrawal from your bank account. Consumers who have ruined their credit because of late or missed payments will see that a peer-to-peer loan can help bring up their credit score. Automatic deductions mean that payments are never forgotten or missed.
Peer-to-peer lenders offer a wide variety of loans. You can obtain a peer-to-peer loan for debt consolidation, medical expenses, relocation expenses, home remodeling, and weddings. There are peer-to-peer lenders specializing in student loans and mortgage assistance.
A Global Market
The first peer-to-peer lender, Zopa, opened in 2005 in the U.K. Since then, the marketplace lending industry has grown to become a $3.5 billion industry. Peer-to-peer lending platforms have proliferated around the globe. Among the current hot markets is Brazil, where the Central Bank recently authorized nationwide peer-to-peer lending. The Reserve Bank of India is promulgating similar rules, which once enacted will open the doors for peer-to-peer lenders to innovate in that country. Peer-to-peer lending is also experiencing growth in Israel and Indonesia where almost 50 marketplace lenders are waiting for final approval from the Financial Services Authority.
Popular with Millennials and Generation X’ers
For younger consumers, peer-to-peer lending platforms have become increasingly popular. In fact, in Europe, more than half the peer-to-peer lending consumer base consists of people aged 22-27. Young investors also are drawn to peer-to-peer lending companies. Fintech, in general, resonates with younger consumers who rarely interact with traditional banks today.
Fintech Platforms Like Peer-to-Peer Empower Consumers
Peer-to-peer lenders have been a life changer for consumers in underbanked countries or places where accessing financing is difficult or perilous. The convenience of conducting a loan application completely online means that more consumers have access to the means to gain economic parity.