In the last few years, blockchain technology has taken over the digital finance with its disruptive power to reshape various industries. In this blog let us understand the concept of blockchain-based peer-to-peer lending platform.
A P2P platform is a direct marketplace for performing money lending activities. Through this platform, any individual can lend money from others where the lender and the borrower are matched via online services.
Lenders are able to go through profiles of borrowers who are looking for money and can offer an amount to individuals or businesses that they find most promising. The borrower can either be a legal person looking for a loan or an individual.
Why peer-to-peer lending platform came into existence?
In global finance, almost all banks are losing their cartel in the financial market. The prime reason for this loss of customer trust.
After this dramatic fallout, many people started to search for an innovative and safe alternative model for financing. This lead to the development of a blockchain-based P2P lending platform. In a blockchain-powered P2P lending platform, individuals lend money to borrowers instead of investing it.
How does it work?
The blockchain-based peer-to-peer lending platform is a straight forward process.
Initially, a borrower who is interested in obtaining loans must fill online applications on the peer-to-peer lending platform.
The platform analyses the application and determines the risk and credit rating of the applicant.
After the application is approved the applicant receives various options from the investors based on his credit score and interest rate.
The applicant can go through the options and can choose one of them.
Finally, the applicant is totally responsible for paying the interest and repaying the amount at maturity.
Advantages of the peer-to-peer lending platform:
The peer-to-peer lending platform provides some significant benefits to both borrowers and lenders
- P2P lending generally provides higher returns to the investors when compared to other types of investments.
- For some borrowers, peer-to-peer lending is a more easily accessible source for funding than traditional loans from the financial system.
- P2P loans usually come with lower interest rates due to the competition between lenders and lower origination fees.
Conclusion
The entire world is witnessing the sudden rise of peer-to-peer lending platforms. So Individuals and businesses are looking for a faster and hassle-free way to borrow money. The blockchain-powered peer-to-peer lending platform is more flexible and efficient than the banks; therefore, they attract a more massive crowd of borrowers and lenders.
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