Ever since the financial crisis in the U.S. happened, potential borrowers have been desperately trying to find better access to credit and at lower interest rates, in the meantime, retail investors have been seeking ways to grow their money more efficiently and receive higher returns on their investments.
Banking institutions, who’ve been saddled with regulatory burdens, haven’t been able to fully meet the needs of either.
Because of this gap in the market, much room was left open for the rapid growth of a new financial sector — peer-to-peer lending.
Peer-to-peer lending platforms like Lending Club and Prosper Marketplace run online lending services that can quickly and automatically match borrowers seeking a loan to an investor willing to provide the funds for that loan at an attractive interest rate.
P2P Lending Market Numbers Infographic
Infographic credit to: www.LendingRobot.com
P2P Lending Growth Facts For 2015
- The Peer-to-Peer lending industry is seeing significant growth, especially in developed countries with strong financial markets. P2P lenders in the US generated $6.6 billion in loans last year, up 128%.
- The US has one of the largest P2P lending markets in the world by loan volume, but the UK’s loan volume 72% larger on a per capita basis. Caused by low consumer confidence in traditional banks (even before the financial crisis), a high degree of comfort with online platforms, and a positive regulatory environment have all helped nurture the UK’s P2P lending market.
- Europe Peer-to-Peer Lending is the next big market: The surging alternative finance market in Europe has reached nearly €3 billion ($3.9 billion) in 2014, a jump of 144%, and small-business peer-to-peer loan volume in France alone grew almost 4,000% last year, to reach €8.2 million ($10.6 million), crowdfunding in Europe is becoming a major factor in the finance sector.
- Although the industry is flourishing, there are to be careful of: New regulations, frayed relationships with traditional bankers (although many banks now want to have a part in p2p lending), possible interest rate hikes, and other factors could put a stop to the industry’s current surge if not checked.
Recap of P2P Lending Report Main Points
- Hundreds of millions of dollars of peer loans are issued monthly in the U.S.
- Borrowing from peer loans is 70% cheaper than credit cards.
- Investing in peer-to-peer lending can be less risky than the stock market.
- The negative impact of loan defaults can be offset by loan diversification.
- Investors have better success lending for credit card debt and weddings than for education loans.
- Lending to certain states can have a negative or positive impact on your returns.
- Popular loans on p2p lending platforms get funded within 30 seconds.