Question

What improvement does Peer to Peer lending bring to the delivery of financial services?

Answer 1

Answer:-

●At a basic level, P2P lending platforms provide a facility creating a marketplace
where investors who wish to lend funds can find potential borrowers and provide
credit through P2P Agreements. These marketplaces are made possible by
online technologies, which provide investors with high-quality direct lending
opportunities that would otherwise not be possible. Platforms may provide
additional value-adding services to their users—the investors and the
borrowers—so that the loan or investment characteristics best meet their needs.
From the borrower’s perspective, P2P lending offers a competing source of
finance to the banks. From the investor’s perspective, it is a new investment
opportunity, similar in nature to corporate bonds but with a focus on small and
medium-sized company (SME), consumer and property loans. P2P lending
provides a new, effective form of financial intermediation.

Improvements:-

●expected returns net of fees and defaults and the circumstance under which this rate is
achievable;
● details of any fees and charges that may be payable;
● a clear warning that capital is at risk and that there is no FSCS cover;
● where lender money will be lent in general terms (e.g consumer loans, SME loans, property
loans, UK/non UK loans, or if mixed how the loan book is constituted);
●how money is treated after a lender transfers it to the platform;
● how any ‘automatic’ function works such as ‘auto-lend/auto-bid/auto-reinvest’;
● the typical time taken to lend out money and the ease and process for withdrawing money;
● the operation of any ‘provision fund’ and the risks involved;
● the proportion of individual consumer funds deployed in the loan book (i.e money that’s not
from institutions or platform’s own money);
● an overview of the checks the platform performs on borrowers and a clear explanation of
how risk rates are calculated;
● any conflict of interest in any of the loans and how conflicts of interest are managed;
● any minimum level of investment and whether non UK lenders are accepted; and
● the applicable tax treatment.