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Bailey McCann, Opalesque New York:

The recent explosion in peer-to-peer lending these days can be hard to explain to the general public, but the story behind the tremendous growth is a simple one: peer-to-peer lending became popular as a means of making small interest-bearing loans to individuals who typically would not receive a loan at a regular bank as credit and lending terms tightened. The accelerated growth in these P2P lending platforms has drawn the attention of both banks and specialty finance industry heavyweights who view it as a new vertical for loan assets. Early on it looked like financial industry biggies were going to squeeze out smaller lenders, but as the space grows it appears there’s enough demand for everyone.

For consumers, the allure of P2P is pretty clear. If your credit is passable but not fantastic you have a shot at negotiating a loan with a real person and not a faceless bank or credit card company that only has profit in mind. For the lenders themselves, there’s a little more risk if, for example, the loans made start to go into default or underperform. However, if they perform as negotiated these small loans can be an economical and profitable investment tool. So far, it seems like the benefits outweigh the risks to both sides as P2P loans topped the multi-billions of dollars last year.

The oldest and most popular P2P lending platforms are LendingClub and Prosper Marketplace. They were originally entrepreneurial ventures, but have......................

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