UK Peer to Peer Lending faces its largest challenge yet
What is peer to peer lending?
Peer to Peer lending is the use of online specialised services to lend money to individuals and businesses. The service is high risk, but offers high interest rates in return for guaranteed loans.
P2P lending is an option for those who aren’t able to get loans through banks. It is also a much better way to get loans than through services with extremely high interest rates.
It is popular with young investors and small businesses and startups. It is also used for any type of loan.
Each loan will have a risk associated with it, based on the person lending the money and the amount they are borrowing – the higher the risk, the higher the interest rate.
The risk associated with peer to peer lending is the issue that the loan may not get paid back, especially as many of these services are not officially regulated.
What is Brexit?
Brexit is the withdrawal of the United Kingdom from the European Union. By withdrawing from the European Union, the government will need to make new arrangements for trade and services.
There is a lot of uncertainty for UK businesses because there is no clear future for how things will operate. Large scale businesses worry for the health of their international business and small businesses are finding it difficult to start out in times where no-one Is looking to invest in anything new.
Why is Peer to Peer facing its largest challenge yet?
Peer to peer lending relies on investors who are willing to put their money into the programs. With uncertainty raising about the safety of investors earnings, they are becoming less likely to want to invest.
This poses a risk on the peer to peer lending markets because the amount of people needing loans is actually increasing. It is increasing because banks aren’t lending to as many people as they were this time 2 or 3 years ago. This is because Brexit is causing uncertainties within the banks too and this means they are turning more and more people away from loans than ever before.
Once people are turned away from banks they look for other options such as peer to peer lending. This means there are more people looking for loans, but not enough people to invest the money.
Peer to Peer lending is going through a large struggle in these times and the future is uncertain for what may happen after Brexit goes through.
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