What is Alternative Lending?

What is Alternative Lending?

Alternative lending refers to the practice of borrowing and lending money outside of traditional financial institutions like banks and credit unions. This type of lending is often facilitated by online platforms that connect borrowers with individual or institutional investors who are willing to lend money.

Alternative Lending Vs. Traditional Lenders

Alternative lending has emerged as a response to the limitations and inefficiencies of traditional lending channels. For example, traditional lenders often have strict criteria for lending, which may exclude borrowers with poor credit history, limited collateral, or unconventional sources of income. Additionally, the process of obtaining a loan from a traditional lender can be time-consuming and cumbersome, involving extensive paperwork, credit checks, and face-to-face meetings.

How do Alternative Lending Platforms Work?

Alternative lending platforms, on the other hand, often use algorithms and data analytics to evaluate borrowers’ creditworthiness and assign interest rates. This allows them to assess risk more efficiently and provide loans to a broader range of borrowers. Alternative lenders may also offer faster loan processing times and more flexible repayment terms.