What characterizes peer-to-peer lending?

Peer-to-peer lending is characterized by direct transactions between individuals, allowing borrowers to obtain loans directly from lenders without the involvement of traditional financial institutions like banks. This model utilizes online platforms that connect borrowers and lenders, enabling them to negotiate terms and interest rates directly.

This direct interaction often results in more favorable terms for both parties compared to traditional lending methods, which typically involve intermediaries. Borrowers may enjoy lower interest rates while lenders can potentially earn higher returns on their money. Therefore, the essence of peer-to-peer lending lies in its ability to facilitate these connections directly between individuals, disrupting the conventional banking approach to loan distribution.