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What defines P2P lending ?
I was asked today the question what exactly defines peer-to-peer lending ?
I would define peer-to-peer lending as follows:
An arrangement made between two or more individuals (at least one borrower and at least one lender), arranged through an intermediary (e.g. Zopa, Funding Circle, RateSetter, etc.) where the loan is still be valid and enforceable if the intermediary ceases to exist. The intermediary would perform all of the same functions as a bank, except that the intermediary it is not lending their money. As such there has to be a high level of trust between lenders and the intermediary.
The key part that differentiates a peer-to-peer loan is the loan is still be valid and enforceable if the intermediary ceases to exist.
There are a range of models today including the Zopa-style market, Prosper-style listings (used by Funding Circle, YES-secure, ThinCats, YouAngel and Squirrl.com), RateSetters market, The Lending Well market and One Stop Funding listing, but all of these would meet the above definition.