Put simply, a peer to peer loan UK enables a borrower to access a large sum of money, while for those lending the cash they will earn a generous rate of interest.
However, these returns also come with some element of risk though the market is taking off in popularity.
Peer-to-peer lending websites have been running for around 10 years and bring lenders and borrowers together by simply bypassing traditional high street banks.
The idea behind them is easy to understand: those lending the money will receive a higher rate of interest than they would earn from a bank savings account, for instance, while someone wanting to borrow money will pay less than they would for a bank loan.
Rates offered are similar to bridging loans rates
Essentially, the borrower and lender are brought together on a peer to peer lender’s platform to make the process easier though borrowers will realise that the rates offered are similar to bridging loans rates in that the rates vary depending on the borrower’s circumstances and purpose of the loan.
Indeed, to illustrate how effective these peer-to-peer lending websites have been, they have apparently arranged loans worth more than £600 million being recent years.
Peer to peer loans work effectively along the lines of an unsecured personal loan with the borrower taking out a loan that is funded by a group of individuals or simply by one individual rather than borrowing money from a high street bank, for instance.
One reason for the growing popularity of peer to peer lenders is down to the credit crunch which has made building societies and banks less eager to loan money in recent years.
Peer to peer lending mortgage to enable the purchase of a house
However, peer-to-peer lenders are certainly more receptive to borrowing requests and will carry out similar credit checks that a bank will do; the purposes of this type of lending also vary from personal loans to offers of a peer to peer lending mortgage to enable the purchase of a house.
Another attraction is that peer to peer lenders often offer a lower rate of interest for the loan than is being offered by other mainstream lenders, including banks and building societies.
One reason for this is that their day-to-day running costs are much lower and the savings are passed on to participants on the platform.
For more help about understanding what a peer to peer loan UK is, then contact the team at The Bridge Crowd.