Peer-to-peer lending.
In plain English
Peer-to-peer lending, or P2P lending, uses an online platform to connect people who want to borrow with people or funds willing to lend, cutting out the bank as the middleman. Borrowers may get a personal loan at a competitive rate; investors earn interest by funding pieces of many loans. The platform sets rates, handles collection, and takes a fee. For investors the yields can be attractive but the risk is real: these loans are unsecured, borrowers default, and the investment is not FDIC-insured. It is a form of investing in consumer credit, not a savings product.
01Why it matters
P2P lending offers borrowers an alternative to banks and investors a higher-yield option, but the default risk and lack of insurance mean it is investing, not saving.
02The math, step by step
An investor spreads 5,000 dollars across 200 P2P loans at a 7 percent target yield. Some borrowers default, so the actual return is lower, and unlike a savings account, none of the 5,000 dollars is FDIC-insured.
03What this is NOT
P2P lending is NOT a savings account or a payment app. It is investing in consumer loans, with real default risk and no FDIC insurance, and it is unrelated to peer-to-peer payment tools like sending a friend money.
04Receipts
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