How Does The Peer Lending Marketplace Work?

The peer lending marketplace is a financial online community connecting investors and borrowers. Their main strength is the lower operating cost which implies that they offer a better deal and are capable of sharing significant savings. Borrowers get rates that are better while investors get returns that are solid; as simple as that.

As a borrower, you can apply for a loan with the proper lender or platform as each specializes in personal, business, or real estate. After which an evaluation process leads to shortlisting applications that meet the criteria for credit. The peer lending platforms like blackhawkcorp.com will remove any information that is personal and easily identifiable to protect your privacy as a borrower. The direct lenders selling your note as an investment will generally need to disclose FICO scores and personal financial information to prospective lenders up front.

Investors are exposed to diverse loan types and may form a secured investment (real estate and construction) or an unsecured investment (personal) portfolio. Investors will receive a cash flow that is predictable based on the predetermined loan terms outlining the repayment of principle and interest.

The real estate marketplace lending services connect investors and to real estate owners who wish to borrow cash by utilizing a model that is quick, easy, and transparent. Investors get access to a new “self-directed” fixed income product with attractive returns while borrowers receive desired rate and terms based on the viability of their project.

The companies’ loan consultants vet all loans and the investor collects the payments directly or by an independent loan servicing company. All parties’ privacy are protected as any other commercial real estate or financing projects.

These types of companies are not banks; even though being a bank has its advantages like borrowing money from our government at virtually zero and being able to leverage it over three times the principal amount. Contrary, Peer marketplace investing provides an interesting and different alternative for borrowers with creditable loan requests and for investors. One of the attractive features of marketplace investing is in its provision of a “self-directed” investment, significantly better yields (8%-12%), transparency, minus traditional bank fees.

The lending marketplace requires however both peer lending platforms and banks to work in harmony. The bank requires a real estate asset with stabilized rental income above its 1.25 DSCR to qualify for a low interest commercial loan. The property owner may need the peer lending platform to provide the bridge financing for an empty building purchase and construction work so as to reposition the property. Now, with signed leases and a history of rental income; this is a desirable asset for the bank to lend on and add to its asset portfolio. As such, the bank pays off the bridge lender (private lender from the peer lending platform), the borrower ends up with a lower interest rate resulting in a positive cash flow asset, and the bank gets a commercial asset that meets its balance sheet requirements.

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