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Peer-to-Peer vs. Marketplace Lending: What's the Difference?

What is Peer-To-Peer Lending?

Peer-to-peer lending is a type of financing that allows business owners to borrow and lend money without the involvement of a traditional financial institution. Peer-to-peer lending platforms match borrowers with investors who are willing to fund their loans.

What is Marketplace Lending?

Marketplace lending is a type of lending that allows business owners to obtain loans directly from investors, without going through traditional financial institutions. Unlike Peer-to-Peer platforms, Marketplace lenders have multiple funding streams. They connect borrowers with individual investors as well as institutional investors who are willing to fund their loans in return for monthly interest.  Institutional investors can take the form of family offices, venture capital firms, investment groups, asset managers or banks and invest millions via platforms such as FOLK2FOLK.

What’s the difference between Peer-to-Peer and Marketplace Lending?

The key difference between peer-to-peer and marketplace lending is that peer-to-peer lending platforms are typically used by individuals, while marketplace lenders connect borrowers with both individual and institutional investors.

Advantages of Peer-To-Peer Lending and Marketplace Lending

There are a few key advantages of peer-to-peer lending and marketplace lending, including:

  • Competitive interest rates for investors –  peer-to-peer and marketplace loans usually offer attractive rates of interest to balance the risk investors are taking.
  • Quick and easy process – typically peer-to-peer lending companies and marketplace lenders make it easier for borrowers to access finance and get their loans funded quickly.
  • A flexible approach to borrowers – peer-to-peer platforms and marketplace lenders do not have to work to the same criteria as banks. As a result, they are able to take a more holistic view of the borrower, the project, and the security meaning they may be able to say in instances where traditional financial institutions would say no.

So, is peer-to-peer lending or marketplace lending right for you?

It depends on your individual needs and circumstances. If you need an interest-only business loan quickly or are interested in investing in a loan with the peace of mind of having your investment secured against the tangible assets of land or property, then peer-to-peer investing or marketplace lending may be a good option for you.

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