What is peer to peer (or p2p) lending?
Peer to peer lending is the process of borrowing or lending money through an efficient online marketplace, as compared to the traditional route of a bank as an intermediary. By removing the bank from the equation, borrowers are able to access less expensive credit and investors can earn higher risk-adjusted returns than can be achieved through traditional fixed income products, such as certificates of deposit (CDs) or bonds.
In order to qualify for a p2p loan, borrowers must have good credit history, meet underwriting guidelines, and pass identify verification screening. Marketplaces are subjected to many of the same regulatory requirements as a traditional bank which helps ensure a safe experience for both borrowers and lenders.