Question

What is meant by the following term with reference to the sources of finance?

Peer to peer Funding

Briefly explain peer to peer funding. 

Answer 1

1. Peer-to-peer funding involves direct lending and borrowing between individuals without traditional financial institutions.
2. Operates through online platforms connecting borrowers with individual lenders.
3. Participants include borrowers (individuals or small businesses seeking loans) and lenders (individual investors or people willing to lend money for returns).
4. Lenders assume risk and earn returns through interest payments from borrowers.
5. Interest rates are often determined by the borrower’s creditworthiness.
6. Connects individuals in need with a community of lenders, potentially benefiting those who may not meet traditional lending criteria.