The explosive growth in alternative finance in recent years has put the industry in position to be a major disruptor of traditional finance. Alternative lenders such as Lending Tree, Lending Club and OnDeck Capital provide borrowers with lower rates than traditional banks and credit card companies can offer.

While these alternatives are certainly good for borrowers, the rise of alternative lending could ultimately prove to be a big positive for the U.S. economy in ways few ever considered.

Why borrow from an alternative lender?

The first thing about alternative lending that is important to understand is why a borrower that can qualify for a bank loan or a credit card would choose to shop for an alternative loan instead. The primary reason simply comes down to dollars and cents. The most recent Weekly Credit Card Rate Report from CreditCards.com indicates that the national average APR is 15.01%.

Alternatively, marketplace lenders provide sub-10% rates to the best borrowers; some even lend at rates under 6%.

How can alternative lenders offer such low rates?

Alternative lenders have…

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