If you have spent time searching for personal loans services, you've probably noticed that some of them work as peer-to -Peer loan services. While traditional credit services allow you to borrow money from a bank or another financial institution, the peer-to-peer lenders are a horse of a different color. Here's what you need to know about this type of personal loan.
How does peer-to-peer lending?
structure similar to websites crowd-funding Kickstarter and GoFundMe like, lending services peer-to-peer connect you, the borrower, with the people and companies that want to lend money as a form of investment. The loan service makes money by taking a cut of the total loan amount, often called origination or closing costs. Although not without risks, peer-to-peer lending offers a non-traditional method to borrow money than those who are uncomfortable or unable to take a traditional bank loan may find attractive.
The steps for taking a loan peer-to-peer is simple :.
- Complete an application on the loan service website You will be approved or denied, based on the financial information you provide and how you ask to borrow.
- Create a list. If approved, the list you create potential lenders say about yourself, your purpose for wanting a loan and how much you ask to borrow.
- funding. In 7 to 14 days, your loan will be fully or partially funded. If you choose to accept the amount, it will be deposited into your bank account.
- Start repaying your loan. You repay the amount you received plus interest. Most of these loans are fixed rate, which means interest is included in your monthly payments.
What are the advantages of loans peer-to-peer?
serviceslending Peer-to-peer such as Prosper and Lending Club are attractive because they feel less stuffy than a traditional loan. But all the paperwork and effort to deal with a separate bank, there are several great benefits that make these loans attractive.
The interest rates are lower. Currently, both Prosper and Lending Club advertise rates as low as 6% for borrowers with the best credit history. This is largely because these companies operate entirely online, making them cheaper to run and you, the customer savings, money. Many factors are analyzed to determine what your interest rate will be when you apply, but the best in general your credit, the lower your interest rate will be.
The fixed interest rates mean no surprise fees. Because your interest rate is fixed, it will not change for the duration of your loan. So your first payment will be the same as your last. This makes it much easier to plan your refund and prevent default on your loan.
You can try again. Most loan services of peer-to-peer set a minimum amount of your original application to be financed by the time the loan closes. Obviously, the goal is to receive the full amount. But if you get 60% or more of your requested amount with Lending Club or 70% or more with Prosper, you can choose to accept the partial amount. And the best part? You can try again to borrow the rest. Similarly, if your loan application does not receive sufficient funds at the end of your enrollment period, you can usually re-list.
Things to know before applying
Not everyone can borrow. Some states do not allow residents to purchase these types of loans, so it is important to know if you are on this list before you lose time. Prosper are available for people living in Iowa, Maine and North Dakota. While residents of Iowa, Idaho, Maine, North Dakota and Nebraska are not allowed to borrow from Lending Club at the time.
You can not get financing. Getting approved for a loan from a lending service peer-to-peer is only the first hurdle. After that, you should set up a list that requires lenders to finance you. Although the ability to add a personal touch is great, it does not necessarily mean that you will receive funding. Because the window is relatively short - 14 days in most cases - there's a chance you might not be getting the money to close your loan. And while it is generally possible to try again, repeating the process more than once can be daunting for some.
Repayment periods are not very long. Both Prosper and Lending Club offer loan terms between 36 and 60 months - or three and five years. It's not very long, it is best to ensure that you will be able to make monthly payments for the period of time so you do not risk failure. On the other hand, there are no penalties for paying off your loan in full at the beginning, so that is always an option.
Overall, loan services peer-to-peer offers a unique way to borrow money that does not require the intervention of a bank. You can learn more about peer-to-peer lending services mentioned in this article, and other personal loans services, by visiting our new magazine brand page personal loans.