Demand for financing facilities has always been high in Australia, more so now that many Australians are experiencing financial hardship due to the pandemic. However, loans being offered by Australian banks are not always accessible, or for that matter, affordable to ordinary citizens and small businesses. Through the years, as the need for affordable and easy to access loans saw a continuing rise in Australia, a new breed of financial service providers known as fintechs have introduced a novel approach to both investing and lending.
Why Borrowing from Banks are Next to Impossible for Ordinary Consumers
Since banking institutions loan out money using funds entrusted to them by their depositors, it’s important that the risks involved in doing so is minimal. Moreover, lending among traditional banks is generally profit-driven. Primarily because they cannot use money deposited by clients to pay for their day-to-day banking operations.
Bank loans are often difficult to avail even for small and medium enterprises (SME), as not many in this group have already attained proven track records, or have extensive credit histories; or even own real estate assets to offer as collateral.
Through fintechs, consumers and SMEs can take out loans by way of peer-to-peer lending that banks cannot match.
What is Peer-to-Peer Lending?
Apart from technological innovations that allow fintechs to be more flexible and agile in providing financial services, fintechs introduced peer-to-peer lending, a.k.a. P2P, as a way of sourcing funds to lend to consumers and SMEs.
Peer-to-peer (P2P) lending is a method of enabling individuals to borrow money directly from ordinary people who have surplus money to invest. Through a platform, fintechs offer lending to individuals as a form of investment, denoting that the funds invested will be offered as loans to those looking to borrow money under less rigid conditions.
The interests collected from corresponding borrowers will then serve as profits of individual investors, which are of course higher than interests earned, if funds were placed as savings and time deposits in banks.
That being the case, fintechs apply due diligence in evaluating the creditworthiness of borrowers, but at lesser overhead costs. While those with poor credit history may apply for a P2P loan, the interest rate imputed will be higher, as the borrower will be classified under the high risk category.
Currently, as there are numerous fintechs offering their P2P lending services, Australians can now shop around for the best deals, usually with the help of a finance broker. The latter after all, better understands the terms and conditions pertaining to a loan, and how those can impact a borrower’s personal finances. Although the lending process, such as the transfer of money and collection of monthly payments are automated, negotiations or haggling is possible with P2P financing.
How Leading Finance Broker National Loans Australia Can Help
When planning to avail a loan, whether from a bank or through a fintech, it would be best to hire a finance broker who understands all the intricacies of lending practices and processes. As licensed finance brokers, the team members of National Loans Australia (NLA), help individual borrowers sort out all the financing options available as responses to the pre-approval loan forms sent out to banks and financing institutions.
One thing that makes NLA finance brokers a cut above the rest is that they have had more than 24 years of experience in brokering bespoke loans for their clients. In turn, their track record as finance brokers have enabled them to build successful relationships with banks and other financial institutions, including fintechs.