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Peer-to-peer (P2P) lending platforms like LendingClub connect borrowers directly with investors, yielding 5-10% returns versus savings accounts’ 0.5%. Blockchain variants ensure transparency and security.
Investors fund loans for debt consolidation or business startups, diversifying across hundreds. Automation handles collections; defaults are mitigated by credit checks.
Risks: platform failures (e.g., past scandals) and economic downturns increasing defaults. Regulations like SEC oversight build trust.
Begin with small amounts, research borrower ratings. P2P empowers everyday financiers, fostering community-driven growth over traditional banking.