Following the 2008 economic downturn the need to find new and effective ways of raising funds over traditional bank and credit union based lending became apparent. One of the growth areas of Online lending has been social lending platforms, often referred to as peer to peer lending, which is now being used to fund movies, business startups and much more. The growth of this industry has seen many investment companies and large banks look to back smaller social lending companies from 2012 onwards in the US, a sign that 2015 could be the year when social lending platforms become more and more popular with those who would normally search out traditional lending opportunities.
One of the many reasons why both lenders and borrowers are being attracted to Online lending options, with markets now open for people with any credit rating and employment level to get involved in Online lending. Peer to peer lending options allow a lender to publish details of why they are in need of funding and how they intend to use the money they hope to raise, usually below $35,000. Lenders, backed by large banks or individuals lending as little as $25, can then choose to invest in the individual and receive a return in the form of interest on the funds borrowed. Many social lending platforms do publish details of the potential borrowers credit rating and other basic details to attempt to assist lenders in choosing which investment to make. Other platforms simply allow the individual to make a choice based on their gut feeling about the success of a product, business or personal venture.
The history of social lending in the US dates back to 2006 and has seen regular and sustained growth ever since. The growth of the industry saw the top two lenders in the US have over $2 billion worth of loans active by the end of 2012, growth has continued throughout 2013 and 2014 This growth is expected to hit even higher levels in the coming years as more and more people look for different ways of funding projects over the traditional loans offered by banks and credit unions. Low default rates ranging from 1.5 to 10 percent depending on the risk rating of the individual have also made this a popular option for lenders who are looking to obtain a long term return on an investment of any size. The peer to peer lending market is now described as a fully fledged investment opportunity, now backed by many of the top investment groups in the world that looks set to grow into 2015.