Many personal loans are now based on peer to peer lending programs
Many people are now turning to peer to peer lending because of the easy loan application process. With peer to peer lending, your loan will be funded by a single investor or multiple investors. In peer to peer lending, you sign up for the loan through an online service that provides comparison on different lenders. Such loans are usually unsecured loans lent for personal uses even though sometimes they may also offer loans for businesses.
The main advantage of P2P lending is that it is cheaper because there are lower overhead costs. The interest rate is typically lower than a conventional bank loan and you also don’t have to pay a lot of fees. When you apply a traditional loan, you are expected to pay for various fees such as application and processing fee. The interest rate is fixed for the entire duration of the loan term. They also do not incur any early repayment charges so you don’t have to pay for any penalty fee if you plan to repay back the loan early.
P2P lenders are flexible in letting you choosing the loan term, which can last for 3 – 5 years. Because of the short loan term, the monthly repayment fee can be more expensive and prevents you from having extra money to spend on other expenses. However, you will save a lot of money in the long term and it also discipline you to pay back your loan faster.
It is generally faster to get approved for a P2P loan because the entire lending process takes place online. The first step is to check your rate by answering a few questions in a survey. Your loan will immediately get approved when there are people investing in your loans. The funds will arrive in your account immediately once the loan is approved. You could get approved within minutes and get the funds direct deposited into your account in 1 – 3 weeks. There is the option of setting up automatic monthly repayment so that you don’t have to forget about repaying back the minimum amount.
There is no requirement on how you can spend the money in the loan. In P2P lending, you explain why you want to take out the loan and they will decide whether they want to lend you the money. On the other hand, a bank loan may set restrictions on what you can use the money for.
During the P2P application, you will be connected with a large network of lenders with different requirements. This improves your chance of getting approved because there will always be lenders with not so high requirements that you are able to meet.
In conclusion, P2P lending is suitable for people who need to get a loan quickly but don’t want to have to apply through the bank. Before applying, you can visit several P2P lending sites or use a comparison tool to compare the interest rates. As a reminder, you must make sure you fully understand the loan requirements and know your financial responsibility as a borrower.