Sergey Vasin, COO, Blackmoon
In 2017 the US peer-to-peer market reached USD 26.6 billion in terms of total loan amount issued, while in 2018 it is expected to achieve a whopping USD 38.9 billion, according to AltFi data.
This industry provides investors with solid returns and borrowers with accessible credit.
Peer-to-peer (P2P) lending is a way to bring together lenders and borrowers on one marketplace and give them an opportunity to contact directly. This direct contact helps to minimize the need for an intermediary, thus reducing the cost of operations. Lending and borrowing now become two sides of one action instead of being completely separate processes. Another source of cost reduction is the web-based nature of the business, when the majority of operations that would normally be performed in a bank’s branch – such as loan application, scoring and even loan agreement execution – now happen online. All this helps platforms to offer interest rates to lenders that are higher than they would normally receive by making a bank deposit or buying other investment products offered by banks, while borrowers receive lower rates and enjoy simpler underwriting processes.
A marketplace model of lending has existed in the market for years, with the first platform, Zopa, being founded in February 2005 in the UK. Zopa was soon followed by Prosper and Lending Club in USA. The latter is currently the biggest player of the market and the first to gain SEC approval after the Securities and Exchange Commission set a number of rules in 2008.
The rules of the game are quite simple. To invest you simply pick one or several platforms you like the most, register an account, and that’s it! You can start operating right here. The only question left is how to decide which people/projects/companies are worth investing in? How to ensure that you will gain profit and not lose the money you lent? To succeed you have to become an expert in this field. Understand the scoring, credit decision-making, prepayments, valuation of underlying, etc. Moreover, you will have to spend time to analyze available options repetitively.
If that’s not the style of investment you were looking for, there are professional investment funds ready to help you. Investment funds operating in the peer-to-peer lending market have automated scoring models in place. Enlightened with knowledge and expertise, funds represent the second line of defence by choosing the best investment objects from those previously approved by platforms themselves. Funds are accumulating investments and splitting them between a number of borrowers, so that even if one of them defaults, it will have a minimal impact on the loan portfolio.
One great example is the Prime Meridian Real Estate Lending Fund, which has been operating in the real estate peer-to-peer lending market since February 2016. The Fund’s objective is to earn a net return of 8% annually for investors, while maintaining low default and annualized loss rates, from a diversified, secure real estate loan portfolio of first lien loans purchased from multiple online/Marketplace Lending platforms in the USA.
And it is now possible for crypto investors to get access to this industry with the leading expert in the field and minimum investment as low as BTC 0.01 without leaving blockchain. You can find more details about Prime Meridian Real Estate token offered by Blackmoon here.