Anything to fear in peer-to-peer lending?

It has always been easier to lend money than to get it back. The risks of this new form of lending are worth examining.

Summary: Peer-to-peer lenders expect a certain level of personal loan defaults and some are setting aside funds in case of future losses. In a recession, lenders could expect the rate of defaults to rise, based on the experience of history. In the case of loan defaults, it is the platforms that are entitled to recover the money, not individual investors.

Key take out: Interest at peer-to-peer lenders can be calculated differently based on whether investors leave their principal on the platform or take it back in regular monthly repayments.



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