Peer to peer lending is the process of borrowing or lending money through an efficient online marketplace, as compared to the traditional route of a bank as an intermediary. By removing the bank from the equation, borrowers are able to access less expensive credit and investors can earn higher risk-adjusted returns than can be achieved through traditional fixed income products, such as certificates of deposit (CD’s) or bonds.
In order to qualify for a p2p loan, borrowers must have good credit history, meet underwriting guidelines, and pass identify verification screening. Marketplaces are subjected to many of the same regulatory requirements as a traditional bank which helps ensure a safe experience for both borrowers and lenders.