A growing number of consumers are shifting to peer lending services as a solution for their borrowing requirements. This tendency is a direct outcome of banks and credit card policy decisions.
First, consumers are facing increasing challenges in investing money with the tight lending environment. Consumers are either unable to secure a personal loan or end up paying a less than desirable interest rate.
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Additionally, credit card companies have been lowering limitations, raising penalty fees, and increasing interest prices. Peer lending services can compete with traditional banks and credit card companies because they don't have the operating costs.
As a result, they can pass along these savings to lenders and borrowers in the form of lower service fees and higher returns. Also, these services offer a range of possibilities for consumers with different credit scores.
For instance, those who have a good credit score can borrow higher amounts at a lower interest rate. This doesn't mean each borrower receives a loan. Borrowers should still meet specific requirements before receiving financing.
These conditions might differ across different companies which range from a minimum financial accounting and controlling.
Some peer lending services require investors to have a certain annual gross income and net worth. These requirements help ensure the investor has some level of sophistication and will be able to tolerate the risks involved with this type of investment vehicle.
Peer lending is an emerging trend and is not as widely known among those who would invest in stocks, bonds, and mutual funds.