Peer to peer lending is a platform that allows individuals to borrow without using a bank or credit union. If you are looking to borrow a loan, then you should evaluate peer to peer lenders as you shop around. Particularly, if you have a good credit history, then the interest rate for p2p loans can be exceptionally low. Even if you have not so perfect credit, you still might get approved for an affordable loan with online p2p lenders.
What is a peer to peer Borrowing?
Peer to peer loans is the types of loan which the investors and individuals make as opposed to the loans which come from the traditional bank. A p2p lending service is a central market that matches borrowers and lenders, making the whole process comparatively easy for everyone involved.
How p2p borrowing Works?
If you want to borrow a p2p loan, then you just have to select a lender and begin the application process. Usually, you just have to provide details about yourself and the lender might ask you about your plans for the money. The majority of the loans are personal loans; however, lenders might promote different types of packages such as debt consolidation or home improvements. Then the lender will check your credit history and if you are eligible for the loan then the investors can fund your loan.
With some of the p2p lenders, the funding process can be quick, however, you might have to wait for funding. The whole application process can take several days or maybe a few weeks. If your loan gets funded, then you will receive the loan electronically and repay the loan with automatic repayments. Generally, you repay the loan over 3 to 5 years, however, you can always prepay the loan without getting any penalty, this way you can save money on the interest.
Credit reporting:
you create credit as you repay the loan. The majority of the lenders report your activity to the credit bureaus, which can help you in borrowing loans on better terms in the future. However, if you pay late or if your loan defaults then your credit will suffer. Hence you should make repayments a priority and communicate with your lender in case you fall on hard times.
Advantages of Borrowing with the P2P platform
P2p loans are not always a better option compared to the traditional bank and credit union loans, however, they are usually competitive.
Origination fees:
you might have to pay an up-front origination fee of 1 to 5% in order to fund your loan with p2p lending. That charge depends on the total amount that you borrow, hence a loan of £1,000 may feature a £50 fee. In comparison to a personal loan at a bank which can have high fees. On the contrary, you would probably pay more for a second mortgage. Of course, you will have to pay extra fees for things such as late repayments.
Fast and easy: shopping around for a loan can be hard. And after you apply for a loan, you may need to wait for some time to find out if you are approved. The p2p loans can make this process much easier. Generally, the application process is straightforward and often you can find out quickly whether you got the loan or not. The actual funding can take a few days or even longer. But the decisions are made quickly since non-bank lenders online fund loans are large investors.
Low Rates:
Often you can borrow at a comparatively low rate through p2p loans. Credit unions and banks need to cover the overhead costs for the branch networks, other lines of business, and a huge workforce. P2p lending is generally a better deal compared to a credit card. However, it is always worth comparing interest rates. If you do so then you will pay attention to the promotional interest rates and can determine whether you can pay off your debt quickly or not.
Credit matters:
there are lenders hesitant to lend loan to those who have negative items in their credit history. You need to have a decent credit history in order to get approved for a loan. however, p2p loans may give you more options compared to the lenders in your area. the bad credit you have the more p2p loans will cost you with high-interest rates.
Types of Loans
peer to peer loans actually started out as personal unsecured loans since you could borrow for any legal purpose and you didn’t need to provide collateral to get approved for the loan. since they are most flexible, personal loans are still the most common type of p2p loans. you can just put the money into debt consolidation, home improvement, a new car, or for starting a new business.
there is a specialized peer to peer lenders who now provide loans for specific uses such as fertility treatment or business loans along with loans that you can secure with collateral.
Is it Safe to Borrow With P2P?
it actually depends on what you mean by safe, however, the majority of the mainstream lenders are relatively customer-friendly.
● Privacy: with a p2p loan, your identity is kept a secret from the individual lenders. nonetheless, you have to review the privacy policies in order to understand what kind of information investors receive.
● Rates: usually the interest rate in p2p is competitive with what you can find elsewhere. you will certainly pay less compared to what you would be paying for a payday loan. yet, the interest rates can increase on variable rate loans which causes your payment to increase.
● Data: the popular peer to peer lenders keep all your information as secure as any other financial institution. and all the communication takes place via an encrypted browser session.
