Secured vs. unsecured P2P lending
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Secured and unsecured P2P lending are two distinct approaches to lending in the context of peer-to-peer platforms. Secured P2P lending refers to loans backed by assets, such as traditional ones like real estate or cars, as well as digital ones like cryptocurrency, as collateral. When a borrower defaults, the lender can seize and sell the collateral to recover their funds.
On the other hand, unsecured P2P lending does not require collateral. Lenders base their risk evaluation on the borrower’s creditworthiness and financial background. In cases of default, lenders often turn to legal procedures for debt recovery as they have no specific assets to seize in the event of a default.
The P2P platform’s collateral policies, interest rates and risks must be carefully considered by both borrowers and lenders when considering offering an unsecured loan.
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