With a rapid deepening of economic polarization, the number of delinquent borrowers are increasing severely. P2P lending(P2P loan), an abbreviation for Peer to Peer, has come into the spotlight on this account as an alternative to the small-loan finance. P2P lending is a deal which enables a borrower to receive a loan with low and reasonable interest rates (about 26% per year) compared to those of the private money lending and credit card loans (about 39% per year). In this regard, both the lenders and the borrowers get benefits; through its diversifying effect, which makes lending money spread out across a number of borrowers, the lenders are able to lower the risk of being bilked by the borrowers and make a great profit as well. One of the advantages of the P2P loan is that the borrowers and lenders can communicate with each other. Unlike other loan systems, P2P loan makes the borrowers represent the reason for receiving the loan as well as their repayment plan. This is for to replace borrowers’ bad credit and sets out a flexible qualifications for borrowers. It would benefit low-income earners who would otherwise be under pressure of high interest rates and repayment.
P2P lending was introduced to Korea in 2007. It is still at its early stage and most transactions are involved with personal financing for the people with bad credit rating. Since its interest rates are at 20~30%, which is comparatively lower than the private loan, P2P loan is expected to expand this year. However it is still facing some difficulties related to credit assessment and a risk management because the deals are made between the party concerned without a broker. Thus to settle the matters and to vitalize the small-loan finance;
I. the investors should be informed of the qualities of P2P loan and be clarified where the responsibilities lie
II. regulatory means to protect financial speculators should be sought
III. ways to use P2P loan in various categories such as profit making and supports for foundation of small businesses should be improved.
안 소 빈 / An So Bin (email@example.com)