Peer to Peer Loan Management Software
The peer-to-peer lending industry grew in popularity when, after the 2008 financial crisis, banks were wary to lend, especially to customers without perfect credit or histories. Peer-to-peer lending companies stepped in by offering loans that banks were missing out on. But according to recent data, even as banks and financial institutions are increasing their loans, alternative forms of lending are also becoming more popular, and potentially changing what it means to borrow and lend in the future.
In a USA Today article, the Lending Tree, one of the biggest names in the peer-to-peer lending industry, has been growing in size ever since it’s creation during the crisis. Now, the growth is about 7 percent a month.
“Founded in 2007, San Francisco-based Lending Club topped $1 billion in loans for the first time last year and will soon fund its 100,000th loan, thanks to its ability to put potential borrowers together with other consumers willing to lend them money,” the article said.
The way the company works, and the reasons behind its success, is its efficiency. When borrowers sign up, Lending Club uses risk management tools to determine which borrowers are eligible, and then sets them up with lenders to provide the funds. It’s similar to how most lenders work, weeding out risky borrowers, but since it’s online, peer-to-peer lending can set these two parties up directly.
“What we do is connect the source of capital directly with the use of capital,” founder and CEO Renaud Laplanche said.
While this type of lending and borrowing is not expected to disappear, others can still learn from the Lending Club’s tactics. With credit and risk management software, lenders can make the entire process more efficient, and appeal to borrowers. By using software to cut back on the extra steps, both borrowers and lenders can benefit.