Peer-to-peer lending
In P2P lending, a fintech company connects people or businesses with investors who want to lend them money. In exchange for making the connection, they collect a small fee. Prosper, the first P2P lending marketplace in the United States, uses this model to connect good-credit borrowers with investors and helps process loan applications.
Investor loans
Rather than providing loans themselves, some fintech companies source loans and sell them to investors. Better, the fintech mortgage lending company, is a perfect example of this. Instead of earning a commission on loans, it sources customers who want to take out a mortgage, qualifies them, then sells the mortgages to banks like Wells Fargo or institutions like Fannie Mae.
Much like a typical mortgage broker, Better serves as a bridge between borrowers and investors. However, they’re able to provide these services without charging the same commissions brokers typically charge.
Mortgages
Some fintech companies do provide actual loans. What differentiates them from typical financial institutions is the use of technology to improve the lending process, like Rocket Mortgage. As a pioneer in fully online loan applications, the company has become a leader on the tech side of mortgage lending, focusing on making the process faster and easier while offering competitive rates. Rocket closed $351 billion in mortgages in 2021, making it the leading mortgage lender in the USA.
Business loans
Some fintech lending companies work to help small businesses access the capital they need to grow. This is crucial, as many small businesses are not eligible for credit from traditional institutions due to a higher perceived risk. Using technology, fintech companies like BlueVine can better assess lending risk and make decisions up to four times faster.
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