Peer-to-peer lending involves lending money to individuals or peers who are not related to the lender. These are usually unsecured personal loans ranging from smaller to larger amounts, depending on the arrangement. Peer-to-peer lending, or P2PL, seeks to bypass traditional financing routes such as banks or other lending institutions. It is different from peer-to-peer investing (P2PI), which focuses on the lender aspects.
Some peer to peer lending is done through companies who specialize in arranging such connections between peers, and is often done through online methods. Peer to peer lending is often conducted for individual purposes, although it can sometimes be an aspect of small business loans (especially smaller "mom and pop" type businesses).
What Are Some Characteristics of Peer-to-Peer Lending Arrangements?
Because peer to peer lending is not connected with traditional loan processes, it is associated with certain characteristics. These include:
- The loans are not secured and are unprotected by government insurance policies
- A P2PL company will usually at as intermediary between the lender and the borrower
- The transactions generally occur online
- There is usually no prior relationship between the lender and borrower
Peer to peer lending is often associated with specific benefits. For instance, the lenders have more of a choice of which borrowers to work with. Also, there may be more flexibility in creating and revising the loan contracts themselves.
What Are Some Common Peer-to-Peer Lending Disputes?
Peer to peer lending can sometimes lead to various legal disputes and legal issues. One common dispute is where the lender fails to pay back the amounts according to loan terms. This is of particular concern because many participants in P2PL arrangements are coming from a poor credit background. Many people seek P2PL loans because they don’t qualify with a bank or other institution. This can put the lender at risk.
Another dispute is where either the lender or the borrower engages in loan fraud. This can happen for instance if the intermediary peer-to-peer lending company is not equipped or experienced enough to conduct thorough background checks of all participants. P2PL disputes often require a lawsuit in order to fully resolve the conflict.
Do I Need a Lawyer for Help with a Peer-To-Peer Lending Issue?
Peer to peer lending can have its advantages as well as its risks. You may wish to hire a bankruptcy lawyer in your area if you need help with a peer to peer lending arrangement. Your attorney can help guide you through the process to ensure that your interests and assets are protected. Also, if you need to file a lawsuit due to a dispute, your lawyer can help represent you in a court of law.