When a bank loans money to a borrower, they do it with the money that’s lent to them by a saver. A bank might provide a saver a 3% rate of return on a CD or a savings account and loan that money out at anywhere from 7% to 30% depending on the type of loan, pocketing the difference. The goal of peer-to-peer lending websites is to sidestep banks and allow savers to lend directly to borrowers without a middle man. As a result, borrowers get much better interest rates and savers have the opportunity t to get a better rate of return on their money.

The process of applying for a peer-to-peer loan is relatively simple. Borrowers complete a simple application process online on a P2P lending website. You will be informed what interest rate you can borrow money at immediately. If you like the loan offer, you can finalize your application and your loan listing will be made available to investors on the peer-to-peer lending marketplace. Investors will have up to two weeks to fund your loan. After the loan is fully funded, the funds for your loan will be transferred to your account. A month later, you’ll make your first payment automatically. These peer to peer lending sites handle all of the paperwork and transactions to lenders, so the repayment process is incredibly easy.

If you’re a lender, the process to start investing in peer-to-peer loans has also never been easier. Unfortunately, there are a few states whose regulatory environments aren’t compatible with investing in peer-to-peer loans, so make sure that you can be a lender before signing up. The account creation process takes all of 15 minutes. After getting your account setup, you simply transfer funds into your investor’s account. A couple of days later, your funds are made available and you can begin investing in individual notes on the peer-to-peer lending marketplace you select. As the borrower makes payments, you will receive your share of the borrower’s payment automatically and the funds will be transferred into your investors account. At that time, you can reinvest the funds or take them out of your account.

Becoming involved in peer-to-peer lending has never been easier. There’s more interest from borrowers and lenders than at any point in history.

For an in-depth explanation of how P2P loans work, please visit http://p2ploans.info/.