Blog Invest Marketplace Lending: How It’s Revolutionizing The Industry

Marketplace Lending: How It’s Revolutionizing The Industry

date January 24, 2022 time 5 min read 2092 views

Whether you’re thinking of lending or borrowing or you’re simply curious about what’s happening in the industry, the world of marketplace lending is becoming increasingly hard to ignore. And why would you want to ignore something that could be changing loans for the better? Here’s our summary of what you need to know about marketplace lending platforms, including MyConstant

In the last decade, lending has moved beyond the iron grip of banks to countless startups and new providers. While this liberalized finance for the masses is exciting, it’s also brought plenty of challenges along the way, which has bred skepticism. Are the marketplace lending industry finally starting to mature and become a firm part of our financial solutions?

Online marketplace lending makes it possible for borrowers to access loans from the comfort of their own homes.
Online marketplace lending makes it possible for borrowers to access loans from the comfort of their own homes. (Source: Unsplash)

It’s a huge question, but in an attempt to answer it, we’ll outline what marketplace lending is, the kinds of products it offers (for investors and borrowers), and a few ways for you to get involved.

What is marketplace lending?

People have been lending money for thousands of years—even Ancient Greece had pawnbrokers. And it’s no secret that major financial institutions like banks have monopolized the industry for a long time.

Yet the next step in the evolution of lending may kill the industry off as we know it now. Also known as peer-to-peer (P2P) lending, marketplace lending is all about cutting out the middleman—or, if you want to be more dramatic, putting the power in the hands of the people. Instead of banks having the power to charge borrowers extortionate interest rates to borrowers while giving minimal compensation to those providing the funds.

Marketplace lending connects both parties directly, allowing borrowers to access lower interests and lenders to access higher returns. Sounds like a win-win situation, right? Plus, the interest rates aren’t the only benefit—marketplace lenders also tend to grant loans to borrowers that banks shun, using solutions such as assigning them different risk profiles and interest rates.

Names like Lending Club, Prosper, and Upstart were the first marketplace lending platforms. They’re all internet-based, which helps keep overhead costs low and offer better rates to customers. Yet although they’re relatively new (Lending Club was launched in 2006), a new chapter is coming.

Marketplace lending and crypto

Marketplace lending is all about decentralization—that’s what giving the power back to the people is all about. It therefore shouldn’t come as a surprise that it’s joint forces with the blockchain world.

Crypto-backed loans are the next frontier in marketplace lending platforms.
Crypto-backed loans are the next frontier in marketplace lending platforms. (Source: Pixabay)

For instance, at MyConstant, we’re the among the first crypto-backed peer-to-peer lending platform for investors. Traditional lenders credit check potential borrowers because they want to know if they have a history of paying off their loans successfully. Unfortunately, this can exclude borrowers who would actually be good candidates but have a limited history, went through a rough patch temporarily, or even suffered from identity theft.

Crypto-backed loans solve this problem by letting borrowers put down cryptocurrencies as their collateral, meaning that if they fail to make their payments, the lender will be able to take the collateral instead. Although scams and insecure practices have previously plagued the industry, we carry out KYC checks and ask for 150% of loan value as collateral to give our customers full peace of mind.

Crypto-based lending marketplaces can also use smart contract technology to execute loans, which keeps everything decentralized and secure while ensuring funds get released automatically when loan terms are met.

Borrowing products

If you’re looking for a place to get a loan with lower rates (or just somewhere that will give you a loan in the first place), opting for a marketplace lender could be the perfect choice. Even if you have a good credit score, you might appreciate the chance to keep your borrowing data to yourself while accessing rates as low as 6% APR.

Thanks to the new range of online solutions available, borrowing has never been simpler.
Thanks to the new range of online solutions available, borrowing has never been simpler. (Source: Unsplash)

On MyConstant, our platform is open to the whole world, and you’ll receive your loans in minutes. For our crypto-backed loans, simply deposit one of 60+ cryptocurrencies we accept as collateral, choose your loan terms, and you’ll get your funds straightaway (either in US dollars or a cryptocurrency).

You might have reservations about handing over a huge chunk of your cryptocurrency as collateral, but everything is kept in secure storage and a smart contract escrow, meaning you’ll automatically get money back as soon as you pay off your loan, and nobody can touch it in the meantime.

Another advantage of using MyConstant is that you won’t have to sell the crypto you put down as collateral. As a result, if you’re lucky, it might increase in value while it’s locked away. Our products are therefore a popular choice among traders who want to leverage their crypto to buy even more cryptocurrencies.

Investing products

Given we offer loans on MyConstant and we’re a P2P marketplace, it follows that we’d also offer investors the opportunity to lend and earn compound interest.

If you want a crypto loan, it might ring alarm bells that we don’t carry out credit checks for our borrowers, or that we accept collateral as volatile as cryptocurrencies. But don’t worry—we’ve thought it all through carefully. 

For one, the collateral must be worth 150% of the loan value, giving plenty of wiggle room. Plus, if the value of the cryptocurrency falls too low, we’ll sell it and give it back to you (while the borrower keeps the loan) to ensure your investment remains safe. 

However, even though crypto-backed loans are our flagship product, you don’t need to have crypto to invest using MyConstant. You can also lend money online, and you’ll still have the chance to earn up to 7%. In this case, borrowers will still put down cryptocurrencies as collateral, but you won’t have to handle any crypto yourself. 

Still, getting involved in crypto might not be as daunting as you think. Earning guaranteed interest from lending helps hedge against the cryptocurrency market’s risk. All you need to do is buy one of the 10+ cryptocurrencies we accept in an exchange, transfer it to MyConstant, and leave it sitting there. We accept most big names, such as Bitcoin, Ethereum, and Solana.

Get into marketplace lending with MyConstant

If you’ve decided that marketplace lending platforms are the right choice for you, you should know by now that it’s simple enough to get started.

On MyConstant, it only takes a few moments to collateralize your crypto to receive instant loans with low-interest rates. Benefits include:

  • 24/7 customer service.
  • Rates as low as 6%.
  • Early repayments for lower rates.
  • Instant matching.
  • Store and borrow against over 70 different cryptocurrencies.

Or, put yourself on the other side of the marketplace and earn intereset on crypto up to 7%. The choice is yours.
Sound interesting? Sign up for a free account today and start investing (or borrowing).

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George Schooling

George Schooling

Join our lending lottery to earn 1% APR and a chance to win up to $10 million

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