Peer-to-peer lending in Canada involves borrowing from anonymous lenders via online platforms. Peer-to-peer loan platforms provide a way for you to borrow money and fund work and pay for it in a period of time.
Peer-to-peer loan platforms in India are helping a large segment of borrowers who were rejected by banks or could not qualify for loans. Because peer-to-peer lending is still relatively new to Canada, Canadians are currently limited in terms of platform options available. However, that is sure to change in the future.
Canadian peer-to-peer (P2P) loan platforms like Lending Loop and Gopeer match borrowers with lenders while advocating for faster, more accessible access than big banks and financial institutions. As a result, Canadian regulators gave P2P loan companies the green light, opening the space to an alternative to the traditional avenues of credit. As a result, Canadian regulators have given the green light to the nation’s first consumer-lending P2P lending platform.
What is Peer to Peer Lending?
A peer-to-peer (P2P) lender is a loan company that facilitates a market where lenders and borrowers come together to do business. Peer-to-peer lending, also called P2P lending, connects prospective borrowers to investors looking to finance a portion or the entirety of the loan. P2P lending cuts out the middleman and allows an investor to finance all or part of the loan for the borrower. Investors can lend only $10 for each loan, diversifying investments among several borrowers.
Those looking to invest can use the auto-lending function on the Lending Loop, which will automatically invest across a pool of loans according to the risk attributes you choose beforehand. If approved, you will put down cash which is then lent through the P2P Lending Platform to eligible borrowers. In addition, through the platform, you can track your earnings in terms of principle and interest while your borrowers make payments.
Lending Loop also provides significant transparency around how many loans are issued each quarter, loan default rates, and types of businesses borrowing money. In addition, business owners looking to gain access to loans from the platform need to meet specific criteria, including earning $100,000 in annual revenues and having a 600 credit score or better.
How to Qualify for P2P Lending in Canada
Your credit score and history will determine your interest rate. Still, since you bypassed the banks or financial institutions, rates offered through these peer-to-peer networks are generally lower than what banks or credit unions offer. Yes, you can obtain credit even with poor credit, as P2P platforms serve more customers than traditional lenders such as banks. It may be harder to get P2P loans with poor credit since many P2P platforms require that you have a minimum credit score to qualify.
As stated earlier, many P2P borrowers cannot qualify for traditional bank loans and are turning to P2P lending as an alternative. GoPeers loan criteria are stricter than those of other P2P lenders, so if you have a less-than-perfect credit score, GoPeer might not be your best bet. Your P2P lender might be more willing to lend based on an intricate FinTech algorithm rather than conventional metrics like your debt-to-income ratio and credit score.
How Does Peer-2-Peer Lending Work in Canada?
Because you are essentially bypassing banks, lenders may be able to earn higher returns on their hard-cash deposits, and borrowers can take advantage of lower borrowing rates. In addition, because, unlike bank depositors, peer-to-peer lenders are free to choose whether to loan their money to safer borrowers at lower rates or to riskier borrowers at higher rates, in the United States, peer-to-peer lending is treated as an investment under law, and the repayment, if borrowers default, is not guaranteed by the federal government (the Federal Deposit Insurance Corp.) the same way that bank deposits are.
Once you have received the funding, you pay back the loan, interest-wise, via the online platform (along with the origination fee, in some cases). Unlike a more traditional loan, you register on an online platform to borrow from regular Canadian investors. The online platform matches you with average Canadian investors — people just like you or me — who want to make money in interest from lending out their savings. Gopeer is a P2P platform connecting borrowers looking for personal loans to investors looking for an effective rate of return.
You can also use P2P payment apps for sending payments for free in Canada – Peer to Peer is a great way to bypass fees and additional charges.
What is the Best Peer to Peer Lending Platform Canada Has?
More than 25,000 Canadian investors and borrowers have joined the GoPeer platform, with growth rates of 400% since early 2021, showing an increasing demand for alternative loan solutions that can help provide innovative, high-return investment opportunities for Canadians. Toronto, ON, ON –(Newsfile Corp. — March 16, 2022) – GoPeer, the leading private investment platform and the first of its kind to successfully deliver peer-to-peer consumer lending to Canadians, announced the milestone company achieved: receiving more than $100 million in loan applications since the start of 2021. Peer-to-peer (P2P) lending, sometimes called social or crowd-lending, is a form of finance that links individuals or entities willing to lend with individuals or businesses looking to borrow.
Peer-to-peer lending refers to businesses turning to other consumers and organizations rather than vetted lenders for loans and financing. Peer lending and savings involve groups of friends or acquaintances pooling their money to offer funding in situations where conventional financial institutions would not or would not work. For Canadians facing barriers to traditional banking and other forms of credit, peer-lending groups have long served a significant purpose, providing access to capital that would not have been available to them otherwise. Now, alongside the COVID-19 pandemic, peer lending — in its myriad forms — is becoming more widespread, with some groups moving online, entrepreneurs seeking alternative funding sources, and technology companies developing platforms to capitalize on these invaluable peer networks.
Lending Club is the largest peer-to-peer lender in the U.S. based on the number of loans issued and the income generated, followed closely by Prosper Marketplace. It is an auto loan, a line of home equity, a credit card account, etc. P2P lenders may be more flexible about loan proceeds, the size of loans, the credit quality, or even how quickly they approve and get access to money.