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Peer-to-Peer Interactions and Finance

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Questions and Answers

What does peer-to-peer lending involve?

Crowdfunding from the general public

Direct lending between friends and family

Borrowing exclusively from traditional banks

Matching borrowers and lenders in a central marketplace (correct)

What determines how much the borrower will need to pay in interest in peer-to-peer lending?

Credit score

Risk classification (correct)

Loan duration

Borrower's income

What has been a key factor contributing to the rapid growth of peer-to-peer lending?

Government subsidies for P2P lending platforms

Lower risk compared to traditional banks

Better interest rates offered than traditional banks (correct)

Higher credit limits for borrowers

How is peer-to-peer lending perceived compared to traditional banking?

Having better social value and being more responsible Signup and view all the answers

What is the main source of revenue for peer-to-peer lending platforms?

Charging fees when new loans are taken out Signup and view all the answers

Why are peer-to-peer lending platforms heavily affected when there is no appetite for lending and risk in the market?

Their performance is reflected in their revenues and company valuation Signup and view all the answers

Why have the top lenders in the UK, Zopa and Funding Circle, struggled to make a profit?

High origination and servicing expenses Signup and view all the answers

What does it mean when some lenders spread their investment over many different loans?

They reduce the risk by diversifying their investments Signup and view all the answers

What would be a path to stability for P2P lending platforms according to the text?

Offering other bank services in addition to P2P lending Signup and view all the answers

Why are provision funds set up by some P2P lending platforms?

To cover potential default on loans Signup and view all the answers