In recent years, more and more loan models have emerged and P2P or peer to peer loans are a result of the growing trends in digitalisation and sharing economy.
The increased digitization and interest in sharing economy has created a need for alternative loans and credit opportunities. What does P2P or peer to peer mean? The business model means that people who are well off financially may want to share or lend to others. There is a lot of talk about the new sharing economy and it is reported that the five largest industries in the area will be worth $ 335 billion – already in 2025.
Other words for peer to peer loans are marketplace lending, person to person loans and lending. The good thing is that all parties meet on equal terms and there is no driving profit interest in the loan procedure. How does it work? Why has peer to peer become the fastest growing way of financing new businesses and business ideas? For investors, it is exciting and fun to be involved in the growth of new companies.
Peer to peer loans popular
By contributing a little (such as a gift or loan), the total amount can be sufficient to start and run projects. Crowdfunding is another word on the whole and by collecting many small sums of money it can become a considerable sum in the end. In return, the lender expects to receive what is promised – which may be a refund or one of the finished products once they are released on the market.
Another advantage of P2P loans is that intermediaries can be avoided. Then the borrower is guaranteed a good interest rate and at the same time the investors get a good return. This transparency is appreciated by both parties and competition in the banking sector is largely behind development. Many investors choose P2P instead of shares and for those who need to borrow money, peer to peer loans can be a good alternative to bank loans and private loans.
How to borrow P2P?
Turn to a brokerage service or platform for this type of investment. Thanks to a good credit reporting system, it is easy to get information needed. Among other things, insight is needed into the borrower’s repayment ability and financial situation. Generally speaking, Swedes have high morale when it comes to repayment and this makes it attractive to invest in Sweden.
As security, several factors can be mentioned; Social security numbers and information make it easier to identify, as does ID. The risk of fraud is reduced if proper background checks are done and there is also a good system for missing or delayed payments. Debt collection companies and, by extension, the Crown Prosecution Authority weigh heavily and create good conditions for collecting claims.
What do you pay for interest?
The interest or cost of the loan varies and can depend on several things. On the one hand, P2P is the type of bank loan, which always gives higher interest rates than loans with collateral. But by borrowing without collateral, it becomes easier for you as a borrower to get approved on your application. It is the investor who carries the risk and therefore the return on risky loans is often higher.
If you can show that you are in order for your finances and good ability to pay, you have excellent conditions for getting a good deal on your peer to peer loan.