Explain Peer-to-Peer lending: How it changes the way loans are made compared to the lending approaches...

Explain Peer-to-Peer lending:

How it changes the way loans are made compared to the lending approaches of traditional financial institutions (i.e. banks, financing companies, credit card etc.)

What are the differences and similarities of loans made from P2P and from other traditional institutions?

What improvement it brings to the delivery of financial service?

Expert Solution

P2P loans are loans that individuals and investors make—as opposed to loans that you obtain from your bank. People with extra money offer to lend that money to individuals and businesses through online services. A P2P service (typically a website) is a central marketplace matching lenders and borrowers, making the process relatively easy for everybody involved.

Peer-to-peer lending is a fairly straightforward process. All the transactions are carried out through a specialized online platform. The steps below describe the general P2P lending process:

A potential borrower interested in obtaining a loan completes an online application on the peer-to-peer lending platform.
The platform assesses the application and determines the risk and credit rating of the applicant. Then, the applicant is assigned with the appropriate interest rate.
When the application is approved, the applicant receives the available options from the investors based on his credit rating and assigned interest rates.
The applicant can evaluate the suggested options and choose one of them.
The applicant is responsible for paying periodic (usually monthly) interest payments and repaying the principal amount at maturity.

The company that maintains the online platform charges a fee for both borrowers and investors for the provided services.

jeff jeffy answered 1 year ago

Identify and discuss the following forms of debt-based lending Traditional loans Microloans peer to peer loans...

Identify and discuss the following forms of debt-based lending Traditional loans Microloans peer to peer loans lending circles lending circles

What is information asymmetry in peer-to-peer lending? How does it affect peer-to-peer lending processes?

1. (Chs. 1 & 3) Rapidly developing technologies made peer-to-peer (p2p) lending a fast-growing segment of...

1. (Chs. 1 & 3) Rapidly developing technologies made peer-to-peer (p2p) lending a fast-growing segment of the financial services industry (see, e.g., lendingclub.com or google ‘peer-to-peer lending’). Do you think p2p lenders will become dominant, making traditional lenders such as depository institutions (e.g., banks and credit unions) obsolete in the next two or three decades? (Maximum 500 words.)

An officer of a micro-lending company in a developing country has made eight loans of $100...

An officer of a micro-lending company in a developing country has made eight loans of $100 each. Let Xi be a random variable representing the real rate of return on loan i, i = 1, ..., 8. The real rate of return on loan i is a random variable because a borrower sometimes delays or skips payments, and because inflation during the life of the loan can vary. Assume Xi is approximately normally distributed with mean 0.10, and standard deviation...

Characterize the changes that occur in peer relations during adolescence. How does this affect big social...

Characterize the changes that occur in peer relations during adolescence. How does this affect big social service issues such as gang behavior, teen pregnancy, and teens dropping out of school? Write about the role peer pressure played (or still plays) in your life. What were the results of your conformity? What might occur during identity formation that might lead an individual to continue to succumb to peer pressure later in life? What might have contributed to the development of individuals...

examples of changes in approaches to how and where employees work because of the coronavirus (e.g.,...

examples of changes in approaches to how and where employees work because of the coronavirus (e.g., telecommuting, job sharing etc). Illustrate with examples from specific companies.examples of changes in approaches to how and where employees work because of the coronavirus (e.g., telecommuting, job sharing etc). Illustrate with examples from specific companies.

For each, whether they illustrate forward, or reverse, genetic approaches, and explain why you made that...

For each, whether they illustrate forward, or reverse, genetic approaches, and explain why you made that choice. A.Your graduate student read a paper in which mutations in a specific antioxidant gene leads to resistance to the biological effects of cocaine in mice. She decides to use Cas-CRISPR to make a targeted mutation in the Drosophila homolog of this gene and examine the effects of cocaine on the resulting mutant flies. Is this a forward or reverse genetic approach? B. Your...

There are two main organising approaches to industrial economics. Identify these two approaches and explain how...

There are two main organising approaches to industrial economics. Identify these two approaches and explain how they differ.

1. Explain how peer relations change over time. Your answer should describe peer relations/friendships in infancy,...

1. Explain how peer relations change over time. Your answer should describe peer relations/friendships in infancy, childhood, adolescence, adulthood. 2. Define and describe the 4 types of attachment styles (secure, resistant, avoidant, disorganized-disoriented). Your answer can include how children with each style may react in the strange situation task.

How do you think Lending rules could pave way for private flood insurance expansion will affect...

How do you think Lending rules could pave way for private flood insurance expansion will affect the housing market and eventually the economy?

Question