Financial Technology is one of the fast-growing sectors where today’s innovation becomes yesterday’s news in no time. One significant innovation that has a real staying power in this sector is peer to peer lending. This type of lending does not involve any bank or traditional financial institution, and lenders directly lend money to borrowers through an online p2p2 platform. Due to flexibility, several benefits and multiple benefits, P2P lending has become popular among yield-seeking investors. This sector is continuously expanding, and a recent expansion is seen that is peer to peer funded bridging loans. In this article, we will describe whether this new type of P2P loan is a good idea or not.
What Is P2P Bridging Finance?
Most peer to peer platforms now offer highly specialised bridging loans. These are short term loans that are secured against the property of the borrower. Bridging finance is often used to bridge the gap while long term finance becomes available. Typically such loans are used by the property developers to complete the purchase of a property during the time of arranging a mortgage loan. Another use of bridging loans is by businesses to get benefits from the opportunities of expansion.
Bridging finance was only granted by highly specialised investors and brokers in the past, but peer-to-peer lending introduced an easy way to get bridging finance. Many leading p2p platforms offer a number of bridging finance products that borrowers can use for numerous purposes. These loans are quick to access, and borrowers can get cash quickly as compared to traditional property or mortgage loans.
Is P2p Bridging Loan Safe?
As it is a relatively new service of the p2p platform, both investors and borrowers are concerned about safety. Without the involvement of any bank, borrowers may be confused about relying on this new type of finance, while investors think about whether their money is invested responsibly or not. To remove all the confusion, p2p lenders put in place several measures so that all investors have confidence in their finances.
Many platforms offer contingency funds to mitigate the risk of borrowers default. This fund is used to repay the loan amount if a borrower fails to do so. In addition, the loan is secured against UK residential or commercial property, so there are fewer chances of losing money. Moreover, all the platforms conduct an extensive underwriting process before accepting any loan application for funding so that the lenders are confident about the security of their investment.
When investors are confident, they can offer a reliable loan that ensures the satisfaction of borrowers. Moreover, peer-to-peer bridging finance is beneficial for borrowers as they can use it to fulfil their current financial needs. It is also available for borrowers who have low credit scores.
With time peer to peer lending is becoming more commonplace. That is why the Financial Conduct Authority started certifying p2p platforms. The platforms that are regulated and authorised by FCA are more reliable to get a bridging loan. Now that you know the benefits of P2p bridging loan as a borrower and lender, it can be easier to make the right decision about investing in such loans or getting funds through these p2p loans.