Peer-to-peer lending, sometimes abbreviated
P2P lending, is the practice of
lending money to individuals or businesses through online services that match lenders directly with borrowers. Since the peer-to-peer lending companies offering these services operate entirely online, they can run with lower
overhead and provide the service more cheaply than traditional financial institutions. As a result, lenders often earn higher returns compared to
savings and
investment products offered by banks, while borrowers can borrow money at lower interest rates, even after the P2P lending company has taken a fee for providing the match-making
platform and
credit checking the borrower.