Although the interest rates associated with peer-to-peer loans are the highest, they do have certain distinct advantages too. Here are some of them.
The question is why do people go for P2P loans when they know that the interest rates are higher? Simply because they do offer certain benefits! Imagine a situation where you are in an absolutely dire need for money but you are not able to get it from anywhere. The banks have declined your personal loan applications citing bad credit or your salary is not enough for the loan amount you have requested. You have contacted your friends, family members, and relatives to no luck. But the need is grave and unavoidable. So what do you do? You go for the P2P loans. Most of the P2P lenders do not check your credit history or family background. They lend the money based on personal references for the people they trust. So, people go for P2P loans simply because they are easy to get, even though the interest rates are monstrous.
And how does the lender benefit from it? Well, as already stated, the interest rates are the highest with P2P loans. The lenders know that such kind of ROI is not to be got from any other mode of investment. Therefore, they risk their money for higher gains. Also, they are not completely at risk. Unfortunately, P2P lending is not much regulated and in some countries the lenders usually employ illegal means to recover their money.
Unless your need is extremely unavoidable and you have exhausted all other options, it is recommended you do not go for P2P loans.