What is Peer to Peer Lending?

peer to peer lending

Peer-to-peer loans are a relatively new form of borrowing, and lending that cuts out the middleman. Peer-to-peer business lending can be an appealing option for both borrowers and online lenders, as it often offers lower interest rates, is more cost-effective, and has faster loan approvals than traditional lending methods. If you are interested in learning more about this exciting form of borrowing and lending, keep reading!

What are Peer-to-Peer Loans?

A peer-to-peer loan is a financial institution-free way of borrowing and lending money. Some can be secured loans, however, they’re mostly unsecured personal loans (like payday loans) that are not given by a financial institution like a bank, but instead through a P2P lending platform. The borrower usually pays origination fees to the lender for the loan. While it used to only be a personal loan made to an individual, small businesses are now getting involved.

How Does a Peer-to-Peer Loan Work?

Peer-to-peer lending is a financial transaction in which two individuals borrow and lend money to each other without the involvement of financial institutions such as banks. Personal loans are the most common type of peer-to-peer loan, although business loans and student loans are also available. One thing to note is that prepayment penalties may apply if you repay your loan early.


How to Get Started with P2P Lending

The Securities and Exchange Commission (SEC) regulates peer-to-peer lending platforms in the United States. If you’re looking to get started with P2P loans, keep these five things in mind:

  • Research multiple lenders. Before deciding on a lending platform, it’s important to compare multiple options. Consider factors such as interest rates, loan terms, and fees.
  • Borrower or lender. If you’re a borrower, remember that you’ll likely need good credit to qualify for a loan. If you’re a lender, you’ll need to decide how much risk you’re willing to take on.
  • Understand the risk. As a lender, there is always the risk that the borrower will default on the loan. Make sure you understand this and the other risks involved before you get started.
  • How much money? Decide how much money you want to borrow or lend. Keep in mind that, as a borrower, you’ll be responsible for repaying the loan with interest.
  • Read the fine print. Once you’ve selected a P2P platform, be sure to read the terms and conditions carefully before getting started.

The Best Peer-to-Peer Lenders of 2022

Looking for a P2P platform to use for business or personal use? You’re not alone. The popularity of peer-to-peer lending to get a business or personal loan has grown exponentially in recent years. Loan availability and amounts may vary from state to state, but lending peer to peer is definitely worth considering if you’re in need of some extra cash. Here’s a list of the best P2P lenders of 2022:

1. Prosper

The Prosper online lending platform offers business and personal loans between $2,000 and $40,000 with interest rates ranging from 7.95% to 35.99%. In order to be approved for a loan, you must have a credit score of at least 640.

2. Kiva

Kiva is a nonprofit P2P platform that offers a loan amount of up to $15,000. They’re one of the best peer-to-peer lenders that offer a 0% interest rate. There are no minimum credit scores required and zero years of cash flow documents needed. In addition, no collateral is required.

3. HappyMoney

HappyMoney is a peer-to-peer lender that offers The Payoff Loan for debt consolidation. Personal loans between $5,000-$40,000 are available, and rates start at 5.99% APR. You’ll pay the loan back through monthly payments. The maximum loan term is five years.

4. MyConstant

MyConstant offers crypto-backed and institutional loans. A personal loan amount can be up to $50,000 for individuals and $10M for institutional loans. Terms are one to six months, and the APR is estimated at 6% to 8%. There is no credit score requirement to obtain a loan.

5. Peerform

Peerform offers term loans between $4,000 to $25,000 with an APR from 5.99% to 29.99%. These loans have a term length of three years, but can be extended to five years for consolidation loans. You’ll need a 600 credit score to qualify.

6. LendingClub

LendingClub will fund loans between $1,000 and $40,000 to consumers, and a loan amount between $5,000 and $500,000 to businesses. They don’t have competitive interest rates, which fall between 10.68%–35.89%. To qualify for consumer loans, you’ll need a 600+ credit score.

7. Upstart

Upstart offers loans from $1,000 to $50,000. They approve loans within one business day and require a credit score of 620+.

8. StreetShares

StreetShares offers loans ranging from $2,000 to $250,000. The APR rates vary from 8% to 39.9%, and the company requires a minimum credit score of 540 to qualify for a loan.

9. FundingCircle

FundingCircle provides loans up to $500,000. The company has an APR of 10.13% to 36.00% and requires a minimum credit score of 660.


The Best Peer-to-Peer Lending Options in 2022

Let’s take a look at the best peer-to-peer lending options you can take advantage of in 2022:

1. Best P2P Lending App

Prosper is the best P2P overall lending app on the market. With Prosper, you’ll get a low rate, pay at your own pace, and save money.

2. Best P2P Lending for Bad Credit

Kiva is the best option for anyone looking to get a P2P loan but has bad credit mainly because they don’t require any minimum score to apply.

3. Best P2P Lending for Cryptocurrency

MyConstant is a great option for those looking for a peer-to-peer lending platform that offers loans in both fiat and cryptocurrency. This is something you won’t find offered by traditional financial institutions.

4. Best P2p Lending for Small Businesses

Since 2010 Funding Circle has lent over $18 billion to over 120,000 companies in about 700 industries. They’re a great option for small businesses.

5. Best P2P Lending for Credit Card Debt

HappyMoney is a great platform for peer-to-peer loans, especially for those with low credit scores. Checking your rate on their platform is free and won’t impact your credit score.

6. Best P2P Online Lender

Upstart is the best peer-to-peer, online lender, that offers personal loans and car refinancing. They offer smarter rates, an easy, transparent process, and no prepayment penalty.

7. Best P2P Lending Option Overall

The best lending option overall will vary depending on your needs. You have to decide what’s best for you. Are you looking for the lowest rate? Do you have bad credit and need a loan? You get the idea.


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Kevin Ocasio Kevin Ocasio is a staff writer for Small Business Trends, United States Marine Corps veteran, serial entrepreneur, and certified digital marketer, who writes for various online publications including his own Grind Boss blog.

One Reaction
  1. P2P lending is different, because you borrow money from a private person, a person just like you. It is a digital age way to leave banks and financial institutions away and to do things directly between human beings.

    It is fascinating to negotiate with the lender and to try to get as low interest rate as possible, in most cases using emotional arguments.

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