Difference between p2p Online Lending and Traditional Lending

Difference between p2p Online Lending and Traditional Lending

1. Flat relation

Compared with traditional private lending, the biggest feature of P2P online lending is peer-to-peer, that is, the ultimate fund supplier and the ultimate fund demander directly establish a lending relationship, with a short capital chain and a flat lending relationship.

2. Credit financing

P2P lenders lend money for the need of financial management, which is the development trend of private lending in recent years. In the traditional bank lending relationship, depositors deposit money in the bank to save money. In the traditional private lending relationship, most lenders lend money out of kinship, geographical relationship or industrial relationship, and the first purpose of lending money is to maintain the relationship rather than increase the value of money. P2P, on the other hand, is not like this-borrowers and borrowers establish relationships through the Internet. Lenders borrow for the purpose of currency appreciation, and actually use lending as a tool for financial management. For example, enterprise loan is to establish a relationship between small and medium-sized enterprises that need loans and the middle class and white-collar workers that need investment and financial management, to raise funds for small and medium-sized enterprises, and also to bring investment income to investors.

3. Marketization of interest rates

There are two ways to determine the interest rate of P2P. First, in the case of guarantee, the lender's interest rate is determined by the guarantor, and the cost of money paid by the borrower is equal to the lender's interest rate plus risk reward; Second, in the absence of guarantee, the lending rate is determined by the bidding of both borrowers and borrowers. In any case, interest rate is a reflection of the real price of money in the market.

4. Information transparency

The second characteristic of P2P is that it can break through the time and space limitation of information transmission by taking the network as the intermediary, which leads to the most direct result that the information is relatively transparent, the matching efficiency between borrowers and lenders is improved, and the matching time is shortened. Moreover, information can be directly transmitted between borrowers and borrowers, which saves intermediate links and avoids the distortion of information in the transmission process.