In recent years peer to peer (also known as P2P) lending websites have sprung up in many countries throughout the world. Although they do not all operate the same way, as laws and customs vary in different areas, there are some basics that seem to apply to most of these sites. Peer to peer loans are funded by regular people who are looking for a good investment with minimal risk. The lending platforms allow individuals to set up an account and start lending money immediately. P2P lending investing may require as little as $1,000 with as little as $25 invested in dozens or even hundreds of different loans. Borrowers on these platforms are also regular people who are looking for personal loans for a variety of reasons, including paying off a credit card, getting married and home improvement. While many borrowers turn to traditional lenders such as banks, more and more people are choosing peer lending sites. Should you consider a peer to peer loan? Here are three reasons why you should consider this option.
Speed and Convenience
Peer to peer lending platforms provide a quick and easy way for borrowers to apply for a loan. An application can be completed online in as little as a few minutes and loans can be for amounts as high as $40,000. Very little information is needed for the platform to do a credit check. In some cases, they may verify the borrower’s employment and income. Approval can be anywhere from a few hours to a few days depending on the platform as well as the information provided by the borrower. Another aspect of getting a loan is the speed with which it is funded. This is the step where the lender actually provides the money to the borrower. On peer to peer lending platforms this can be as little as a few days.
Reasonable Interest Rates
Peer to peer lending platforms generally offer reasonable interest rates. Of course, the borrower’s credit score and history will determine the interest rate, and lower credit scores can result in a relatively high rate, however rates tend to be equal to or even lower than those offered by banks. This type of loan is certainly preferable to credit card or high interest borrowing.
One reason many people turn to this type of loan is that they can borrow for almost any reason. The majority of the loans are to pay off credit cards or refinance existing loans at a lower rate. However, some loans are for weddings, home improvements, small businesses, major purchase, medical bills and countless other reasons. Although the platform may ask the purpose of the loan there is usually an option for ‘Other’ so some borrowers do not even say why they are borrowing the money.
Is a Peer to Peer Loan Right for You?
Only you can answer this question but for many people this option makes a lot of sense. If you have been considering a personal loan or think this might be the answer to credit card debt or high interest loans then you should certainly research peer lending in your area. You may find that this is the best solution for your borrowing needs.
Cody Smith is the founder of PeerLoanAdvisor.com which provides advice and information on investing in peer to peer lending.