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Introduction To Peer to Peer Lending

Peer to peer lending, also known as P2P lending is defined on Wikipedia in the following way "the method of loaning money to non-related individuals, also known as "peers" and not going through traditional financial intermediaries such as a bank, or another traditional financial institution". The definition implies that it's an alternative method of lending that allows people to lend to others. 

This practice has existed since the beginning of time, but the concept has gained popularity because of the entry of numerous platforms, mostly online that allow for this type of loan between individuals. A peer to peer funding would require both a willing lender as well as a willing borrower (borrower) who reaches an agreement on certain conditions such as Duration, Interest Rate, and so on. 

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For lenders, P2P lending is an investment tool that is quasi-fixed in that it offers the borrower a fixed return; however, it is much higher than a fixed deposit, but he/she is liable for the risk of higher than a Bank FD or postal bond. Prior to the introduction of P2P platforms, individuals would avail short-term, interest-free loans from individuals who were either directly or indirectly identified to them. 

This was a problem for both loan applicants in terms of social stigma, offering a favor and short-term durations and lenders as a result the lack of legal agreements, insufficient returns, etc. These are the issues which online P2P platforms are able to resolve. Additionally, P2P platforms have been capable of scaling up this practice by allowing transactions between two people who are strangers prior to entering into the platform.