What is Peer to Peer Lending?

April 11, 2022

Peer-to-peer (P2P) lending is the practice of lending money to individuals or businesses through online services that connect lenders with borrowers.

Peer-to-peer lending companies attempt to operate with lower overhead costs, which allows them to provide their services at more competitive rates than traditional financial organizations.

Banks have historically owned most consumer and small business lending because they have the resources to assess a borrower’s credit history, along with the regulatory approval to fund loans. However, this model comes with its disadvantages, namely, high interest rates, the high costs of underwriting loans, lengthy processes, and in some cases – require borrowers to pay high processing fees up front.

This has left room for the growth of peer-to-peer lenders – who connect borrowers directly to lenders or investors, who offer multiple types of loans at low rates to qualified applicants.

Esther Finance Ltd. currently has two categories of users in its P2P programme: lenders and borrowers. To use this service, whether as a lender or borrower, each user will create a profile by signing up for the platform. These profiles are verified by uploading valid verification documentation vetted and checked by an account executive assigned to each user.

A lending/borrowing limit will be assigned to each user. The user can choose to borrow up to this limit as a starting transaction. This limit is doubled upon the successful settlement of each transaction.

The lender holds the ability to evaluate borrowers by reviewing a loan request form, then indicating their desired loan terms to fund the transaction. An account executive will then reach out to facilitate the completion of the transaction.

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