Are Peer-to-Peer (P2P) Loans A Good Option For Borrowing Money?

There are plenty of reasons to look at various options for borrowing money when you need it. A mortgage to buy a home, auto loan to purchase a car, or student loans to attend college.

If you need money for other reasons, you might consider a personal loan or a cash advance from your credit card. You may also look to borrow from a retirement account, take out a home equity line of credit ( HELOC), or ask your family or friends for money.

Taking out a peer-to-peer loan is yet another way to borrow money. The following information explains P2P loans and how they work, the pros for this method of borrowing money, and the potential downsides.

What is a Peer-to-Peer Loan?

Peer-to-peer lending is a type of social lending.

Rather than applying for a loan from a bank, credit union or other financial institution, peer-to-peer lending allows you to obtain a loan with funds from individual investors via an online platform.

This non-traditional loan option has become quite popular with borrowers. Research from the last five years shows that early start-ups have turned P2P lending into a $2 billion industry.