The arrival of the Internet in a general way to the homes of practically all the world, with about 2 billion users all over the planet, has revolutionized the way in which people interact. Internet is not only a form of communication, but also a channel through which to connect supply and demand.

In this way, suppliers and service claimants can already skip several steps in the business chain by accelerating the buying and selling processes, thanks to the use of new technologies. In addition, this virtualization of services especially favors cost reduction.

The financial sector has not been left out of this digitalization and has favored the birth of alternatives to traditional banking, such as loans between people, crowdlending or P2P lending.


What are P2P Credits?

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The concept of this type of alternative finance is simple. On the one hand, a person has savings that he wishes to invest beyond the products offered by his usual bank.

On the other, someone needs a loan at tighter interests than those currently offered by traditional banking. Following these needs, platforms arise, such as the Spanish Bank , which put both parties in contact.

The model emerged in the United Kingdom in 2005 with Zepa as a pioneer, which has already lent more than 427 million pounds. The global economic crisis then caused difficulties for banks and other financial institutions, so the search for alternative investments was activated.

Both entrepreneurs and users realized this need and put their imagination to work. This fact favored the impulse of this type of platforms and whose model has already expanded throughout the world. For its part, the American Lending Club is already one of the world leaders in the sector.


Where are the advantages of P2P Lending?

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For those who ask for a loan it is the improvement of conditions in terms of interest , compared to other services. For investors, it is to obtain a higher return on borrowed money .

These benefits for both parties are possible thanks to the reduction of intermediaries, thanks to the use of new technologies which reduces costs and allows the interests paid by the person requesting the loan to go almost entirely into the pocket of the investor , month by month.


The person who receives the loan

The person who receives the loan

On the other hand, assumes it with a more adjusted APR than the banks offer. For investors, it is to obtain a higher return on borrowed money. Specifically, in the case of Spain’s bank, it is that investors earn interest ranging between 5% and 15% depending on the loan in which they are invested.

Specifically, a credit bureau as well as systems based on Big Data technology, among other tools, are the fundamental pillars of this new investment model. In addition to economic benefits , loans between people have an added value: they are socially rewarding . That is, all agreements are made between people, who know the needs and concerns of those who ask for a loan. That is, among equals.

However, like everything else, there is a disadvantage and that loans are not granted immediately. This type of platform does not contemplate competing with fast credit companies. Borrowers must be patient until a large group of investors completes all the requested money.

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