What is a Peer-to-Peer Loan or Peer-to-Peer Lending?

by Lynnette Khalfani-Cox, The Money Coach on October 28, 2011

Q: What is a peer-to-peer loan or peer-to-peer lending?

A: In the U.S., peer‑to‑peer lending is a relatively new form of social lending that removes banks as the middlemen in a loan transaction.

With a peer-to-peer loan, an individual – sometimes called the lender or the investor – provides funds to a borrower and does so through the help of an intermediary company Two of the most popular peer-to-peer lending companies in America are LendingClub.com and Prosper.com. They screen borrowers and facilitate the loan process for individuals who want loan money to other individuals or their “peers.”

The whole idea behind peer-to-peer lending is that individuals who have additional cash to invest are readily available to loan money to borrowers in need who might otherwise not be able to get the funds they require through traditional sources such as a bank.

Peer-to-peer lending is also called P2P or person-to-person lending.

This Article Answered The Following Money Questions:

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