Social Lending- An alternative to get a secured loan.
Social lending also known as peer to peer lending is a method of financing whereby people pool money together to enable borrowing and lending of money without the use of banks or any financial institution. These are professionally run networks that bring individuals together who wish to lend or borrow money. It caters for people with bad credit score.
It is one of the most exciting developments in the world of bad credit lending to come around in a long way.
One of the most intimating aspects of aspects of finances is that people who need the money most find it difficult to secure a loan. However, the case is the reverse for people who need least need money-this is why social lending comes into play.
Getting a personal loan has been a challenge in the recent years for people, especially those with credit problems. Getting a personal loan from the bank is quite impossible if you have bad credit score.
Peer to peer lending could support the economic system since it promotes more investments and circulation of funds, which explains vital especially in instances of global financial depression. This is why sometimes governments incur an increase in expenditures during hard times just to stimulate the economy.
How do social lending works?
It does so in two ways- Initially, it provides a proven alternative to the otherwise restrictive traditional banking model. Secondly, it contributes greatly to individuals escape from bad debt.
How does social lending cut the banking system out?
Unlike your normal banking institutions, social lending doesn’t manage infrastructure, nor do they have tellers on counters hanging around to assist clients with their dealings. And also whilst the government in no way protects them, they allow for extremely flexible financial institutions. The fact that these companies function at an incredibly economical means that can concentrate their investment capital more on supporting low rates, which could help the borrower.
Comparing these with banks, where borrowers with solid credit ratings are given the equivalent form of credit card like many people who sign up for them.
In peer to peer lending, you happen to be allowed to secure low-interest rates on unsecured loans, which is undoubtedly a huge help for them. This is effective for those who have felt that banks are controlled way too much that it hurts you greater than it helps.
But how does peer to peer lending preserve people from debt?
Keep in mind that P2P lending allows for the consolidation of debt. By bringing in all the investors and credit seekers in a single platform, the latter don’t have to encounter the financial restrictions associated with to manage multiple interest rates from credit card bills issued by different banks. At this point, all the investments are focused into one pool, which supports people repay their debts faster.
So take into account that when you involve with peer to peer lending, you not only take pleasure in the secure and higher returns, but you also get the fulfillment of knowing that you’re beneficial to many people get out of debt. In other words, you, as an investor, are doing a lot of social good by taking part in this platform.