P2P Lending Jargon

As with every industry there are plenty of abbreviations and terminology that can be confusing for a newbie.  Below are some of the terms and explanations I've found to be helpful to understand.  This is by no means an exhaustive list and as such I will continue to expand this list as I come across more terms that may need further explanation.

B2B – Business to Business

Borrower Rate – This should be the interest rate the borrower will be paying on their loan.

Investor Rate – This is typically the interest rate you will receive on your investment.  The difference of the Borrower rate minus the Investor rate known as the transaction fee or facilitation fee to link lender to borrower and manage the payments.

Loan Default – A borrower fails to repay the loan and the outstanding amount owing is written off (you lose your money in that loan)

Loan Default Rate – Typically a % of total loans issued (loans defaulted vs total loans issued).  The lower the default rate the less risk.  EG if the loan default rate is 3% and you owned 100 loans.  You should expect three of those loans to default at some point over their life.

Market Place – Typically a website where a financial service provider facilities Peer to Peer lending

P2B – Peer to Business

P2P – Peer to Peer

Provision Fund – A pool of money set up by the financial service provider to cover investor losses against loan defaults. 

Retail Investor Investing is open to all Australians  

Secured Loan – The loan has some collateral attached that can be sold to recover the value (EG a house is considered collateral against a home loan)

Sophisticated Investor – Investing is restricted to an individual, company or trust who has at least $2.5 million in assets or a gross income of at least $250,000 per year for the last two financial years

Unsecured Loan – No collateral attached to the loan.  

Wholesale Investor – Investing is restricted to an individual, company or trust who has at least $2.5 million in assets or a gross income of at least $250,000 per year for the last two financial years


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