If you need a loan, it’s worth evaluating P2P lenders as you shop around. Especially if you have good credit, P2P loan rates can be surprisingly low. Even with less-than-perfect credit, you may get approved for an affordable loan with these online lenders.
What Is P2P Lending?
Benefits of Borrowing with P2P
P2P loans aren’t always better than loans from traditional banks and credit unions, but they are typically competitive.
You can often borrow at relatively low rates using P2P loans. Banks and credit unions have to cover overhead costs for branch networks, other lines of business, and a large workforce. P2P borrowing is usually a better deal than using a credit card, but it’s always worth comparing rates. As you do so, pay attention to promotional rates, and determine whether or not you’ll pay off your debt quickly.
You may need to pay an up-front origination fee of 1 to 5 percent to fund your loan with a P2P lender. That charge depends on the total amount you borrow, so a €1,000 loan might feature a €50 fee. Compared to a personal loan at a bank, those fees can be high. On the other hand, you’d probably pay more for a second mortgage (and the process is easier). Of course, you pay additional fees for things like late payments.
Quick and easy:
Shopping for loans is a pain. And after you apply, you might have to wait a while to find out if you’re approved. With P2P loans, some of that pain is eased. The application process is typically straightforward, and you can often find out relatively quickly whether or not your loan is likely to get funded. Actual funding might take a few days or longer (as investors choose whether or not to put money towards your loan). Decisions are increasingly quick, as non-bank lenders online fund loans as large investors.
Naturally, this is hugely beneficial for businesses both large and small. Many businesses take out loans because of problems with their cashflow, or to fund new equipment investments and projects. With their quick turnaround times and simplified applications, P2P loans allow you to do this with minimal delays.
How do Peer to Peer Loans Work?
To borrow with a P2P loan, choose a lender and start the application process. You typically need to provide details about yourself, and the lender may ask what your plans are for the money. The lender checks your credit, and if you’re eligible for the service, investors can fund the loan.
With some P2P lenders, funding is fast, but you may need to wait for funding. The process can take several days or a few weeks. If your loan is funded, you receive the money electronically and repay the loan with automatic electronic payments. You typically repay over three to five years, but you can almost always prepay without any penalty—which helps you save money on interest.
Of course, there are a wide range of different P2P lending platforms out there, and within each, individual lenders can vary. As such, not every loan will be suitable for your exact needs. It’s best to speak to qualified loan experts if you’re considering P2P borrowing. Contact LoanGuru today for expert advice and guidance.
Take a look at our P2P loan options for more information.