What characterizes peer-to-peer lending?

Peer-to-peer lending is characterized by a direct borrowing and lending process that occurs between individuals, bypassing traditional financial institutions like banks. This model allows individuals to lend money to other individuals without the need for a bank to act as an intermediary, often facilitated through online platforms that match lenders with borrowers.

Through peer-to-peer lending, individuals can potentially secure loans at lower interest rates than they might receive from banks, while lenders can earn higher returns on their capital compared to traditional savings accounts or investments. Additionally, this method leverages technology to streamline the loan process, making it accessible and efficient.

In contrast, the other options describe different financial mechanisms. Traditional banks acting as intermediaries, venture capital investments, and government student loan programs do not fit the peer-to-peer lending framework, which fundamentally focuses on individual-to-individual transactions.