Small time entrepreneurs and individuals found a cheaper option to finance and start their businesses online. With banks offering high interest in loans, credit investigations and onerous amortization obligations, online communities raised money and lend it to complete strangers. This is called Peer to Peer lending or P2P.
Peer to Peer lending is a type of social lending wherein the lender would bid money to finance a loan application from a struggling entrepreneur from a different country or any prospective person with reasonable need to acquire loans. These loans are needed to start up a business, finance a significant project or help a third world person to start at business and become productive. Voluntary investors pool the funds, send it to the online marketplace like http://Prosper.com, MicroPlace, Zopa or Kiva and delegate the collection process to a collecting agency and charge them with rates lower than what banks offer minus the administrative process.
Loans are divided among lenders and payments are sent directly to the P2P sites which then distribute the money to lenders and report non payments to credit agencies or collection firms. Formal...
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