They say that it’s good to not just be focused on profit, but also be socially involved. The truth is, peer to peer lending attracts investors because it primarily benefits them. They get higher returns, have more flexibility with their investments, and enjoy a more consistent source of returns over-all. But having a bit more perspective won’t hurt would it?
Actually peer to peer lending can potentially help the economy because it encourages more investments and flow of money, which is important especially in times of economic depression. This is why sometimes governments incur more expenses during hard times just to stimulate the economy.
But how does peer to peer lending actually do this?
It does so in two ways. First, it provides a healthy alternative to the otherwise restrictive traditional banking system. Secondly, it helps people get out of debt.
How does peer to peer lending cut the banking system out?
P2P platforms aren’t like your typical banks. They don’t work with infrastructure, nor do they have tellers on counters waiting to assist clients with their transactions. And while they’re not usually covered by the government, they make for very flexible financial institutions. The fact that these companies function at a really low cost means that are able to focus their capital more on supporting low rates, which can help the borrower.
Compare these with banks, where borrowers with high credit ratings are given the same type of credit card as other people who apply for them. In peer to peer lending, borrowers are allowed to get low interest rates on unsecured loans, which is already a big help for them. This is empowering for many who have felt that banks are regulated way too much that it hurts you more than it helps.
But how does peer to peer lending save people from debt?
Note that P2P lending allows for the consolidation of debt. By bringing in all the investors and borrowers in one platform, the latter don’t have to experience the financial constraints of having to deal with multiple interest rates from credit card bills issued by different banks. Here, all the investments are concentrated into one pool, and this helps people get out of debt faster.
This is a good thing because every country needs to keep its people out of debt as much as possible. This allows people to be more self-sufficient and not be a burden to society. You really can’t do that with banks anymore because these corporations are not only heavily regulated, but are motivated to have their clients fall into cycles of debt as well (because they stand to profit more when their clients owe them more).
So keep in mind that when you engage with peer to peer lending, you not only enjoy the stable and higher returns, but you also get the satisfaction of knowing that you’re helping a lot of people get out of debt. In other words, you, as an investor, are doing a lot of social good by taking part in this platform.
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