What
Is Peer-to-Peer Lending and Investing … and Why Should I Know About It?
I am asked
this question daily and because I deeply believe in Peer-to-Peer (P2P) Lending
and Investing as means to the future of investing as well as the global economy,
I am happy to answer that question with passion every time.
P2P Lending and Investing
P2P lending is
the practice of lending money to unrelated individuals or peers, without using
a traditional financial institution, such as a bank. Similarly, those P2P loans
are funded by P2P investors. This type of lending and investing activity takes
place online on P2P sites such Prosper, Lending Club, Funding Circle, UpStart,
SoFi, as well as other online platforms.
The platforms are secure and provide key credit checking tools and other
support for those wishing to borrow or invest on the platform. Interest rates
are set by the intermediary platform the loan is posted on.
Borrowers
benefit because they avoid the punishing interest rates as well as the lengthy
and tedious processes associated with bank lending. Lenders (investors) enjoy a
generally higher rate of return than other fixed income vehicles, avoid the volatility
of the stock market and receive satisfaction from lending a hand to a peer.
The
P2P Investing Industry Is the Investing Powerhouse of the Future
The P2P
Lending and Investing industry was effectively born in the UK in 2005 with
Zopa. Prosper.com was the first US site launched in ’06. From there Lending Club
and others followed. The P2P industry is in a documented state of exponential
and explosive growth. Forbes, Wall Street Journal, Bloomberg, American Banker,
Economist, Fortune and Equities.com as well as several other trusted financial
media outlets have been tracking P2P’s phenomenal growth over the last few
years with scrutiny and now, with validation and endorsement.
Why do those
venerable media institutions, the investment community and I feel strongly
about P2P’s future? Here’s a sampling of
proof points:
- · Google invested $125 million in Lending Club last year, while Prosper raised an additional $70 million in May, ‘14
- · Zopa raised $25 million from a London hedge fund
- · Close to 1,000 attendees at LendIt 2014 in San Francisco, compared to 300 attendees in 2013
- · SEC installed key regulatory measures
- · P2P Lending industry surpassed $10 billion in loans originated
- · Other P2P models beyond consumer credit have been introduced in real estate, student lending, millennial, auto, mining and more
- · Lending Club announced its first acquisition, and added T. Rowe Price and BlackRock as capital providers, not to mention a likely IPO in 2014
Additionally,
it is no secret banks like Wells Fargo and all of the major banks are
increasingly concerned with P2P’s dramatic growth as it continues to steal away
loan customers by the thousands.
Why
Should I Invest in P2P?
The second
most-asked question I receive. It’s simple:
·
P2P Investing diversifies and expands
an investor’s portfolio
·
Rate of return typically exceeds
other fixed income vehicles
·
Is much less volatile than the stock
market with comparable or higher rates of return
·
Allows investors to provide a helping
hand to another individual or sets of individuals
PeerEx (peerexinvest.com),
the leader among P2P investment advisories, offers qualified, customized
guidance and fund management to investors looking to diversify their
investments in order to expand their portfolio and increase yield. Jim Newman,
PeerEx’s CEO, has been involved in the P2P industry integrally from its start
in 2006.
