The peer to peer lending business model aims to be disruptive to the traditional banking system by capturing the spread between “deposit” rates (usually 0-1% in the recent environment) and the rates at which banks lend those same funds (
8-30%). Bypassing the banks – and connecting investors directly with borrowers – P2P lending offers an attractive rate for both. (Detailed P2P lending information is available here.)
Research into loan performance by type of loan:
A variety of personal loan usecases are available and borrower-selectable. While such selection does not alter the terms or rates of the loans (which are set by platforms using a credit-profile-dependent proprietary risk-pricing model), each particular usecase has a corresponding aggregate performance of all of the seasoned loans whose borrowers have chosen to identify their loan as being for a particular usecase. For example, the usecase “debt consolidation” accounts for approximately 50% of all loans originated to date. (It is worth noting that borrowers may select/signal any of the usecases – but are, in actuality, free to use the proceeds of their personal loan in any way that they see fit.) Examples of personal loan type/usecases:
- Debt Consolidation
- Credit Card Debt Consolidation
- Home Improvement Loans
A Note on Business and Small Business Loans
While peer to peer lenders do offer small business loans (up to a maximum aggregate of $25,000 outstanding at any one time), these loans are issued on a personal basis to the (presumptive) owner of the small or medium business. Continue reading “Todd Gillum: Harvard Profile & Research Scope for the Nosy”