Peer-to-peer lending and bad credit

Less than a decade ago crowdfunding and peer-to-peer lending came into life, established by companies that invented a smart way how to make money without putting any of their own money into the business. The whole setup looks as follows: an independent company provides services to both, people with money who would like to save, but want to get a better return than with a regular savings account; and people who have bad credit and need to borrow money desperately, for whatever reason. If all works well, it is actually a very good invention, providing an excellent interest return for the investors and a haven for people in dire need of a loan who have nowhere else to go. On the other hand, the weakest link here seems to be not the person borrowing money with bad credit, but the middleman, the company that brings these two together, which earns money no matter if the investor gets the money back or the borrower pays back the money at all, without risking any of its own money.



The best deal is in any case for the people with bad credit, there are always people in trouble in need of cash, and here is a bunch of people eager to give them some. Where all the banks and other similar money lending institutions have declined to take the risk, peer-to-peer lending houses are apparently very much interested in just such individuals. On the other hand, receiving an interest rate that is almost triple what they would get from a savings account sounds almost too good to be true. Nevertheless, the stream of people eager to invest in such business opportunities is not ebbing off. Suddenly, dozens, even hundreds of peer-to-peer lending houses are sprouting all over the place, mainly on the internet, and none of the government regulatory bodies was appointed to monitor the whole action.

The change

Fortunately for the people on both sides, but actually most fortunately for the government, which is putting its paw on the money stream, the government woke up and the FCA entered into the vacant position of a watchdog. The main concern, if barely stated in the open, was money laundering. The actual sources of all the money loaned out to eager bad credit holders were mainly kept out of the view, there was no open way to gain access to a list or receive information in that matter. Additionally, the rates are starting to dive, ever since it became apparent that the regulatory body FCA will take over from the due date in April 2014. It is still a functioning investment opportunity for legitimate money savers, but it is not guaranteed you, as a saver, will get your money back, in case the whole business goes bust, despite the fact that a “safety net” money fund is being held back by the middleman company in case a debt defaults.

For a person with bad credit, though, peer-to-peer or crowdfunding lending is still one of the best opportunities to gain access to a loan with more or less bearable interest rates.