Definition of peer-to-peer P2P lending
Peer-to-peer (P2P) lending describes a growing trend in the UK and the US and sees cash-rich investors bypass banks and lend directly to borrowers, often through online peer-to-peer lending platforms. Both the investor and the borrower benefits as the lender achieves higher interest rates and the borrower lower interest rates than would be on offer if either had gone through a bank. Although some peer-to-peer platforms have developed funds to compensate lenders in the event of a borrower default, lenders are still at more risk because loans are generally unsecured.
peer-to-peer lending in the news
In July 2013 an FT report looked at research into peer-to-peer lending (P-to-P) by the Open Data Institute which found that between October 2010 and May 2013 nearly 49,000 investors in the UK funded loans worth more than £378m. Some, including Zopa and RateSetter, arrange loans between individuals. Others such as Funding Circle lend to small and medium-sized businesses.
In January 2013 a report examined the success of the P2P market in the US and looked at plans by a US peer-to-peer lender in the US, Lending Club, which had plans to go public within two years.