How it works?
Crowd-lending works by matching borrowers and lenders through online lending platforms.
- Borrowers are able to borrow faster and at potentially lower interest rates compared to banks, because lending platforms have lower operating costs and regulatory requirements.
- Lenders / investors are able to choose the individual loans listed on the lending platforms and earn interest by lending out excess capital.
- Lending platforms perform credit checks on borrowers and facilitate the entire transaction. They earn a fee from each transaction but they do not lend any capital to borrowers. Thus, they are not exposed to borrower default. However, lending platforms may suffer from reputation damage if their underwriting is found to be sloppy.