Personal Loans for Peer-to-Peer Borrowers
Peer-to-peer loans are personal loans made by private investors or by institutions. We’ve compiled a list of the most effective peer-to-peer loans from online lenders.
Peer-to-peer lending allows you to get money directly from an individual or group rather than go through the bank. As with other online loans, they are typically administered by a company that deals in financial technology and don’t require the application process in person or the phone number of the loan agent.
A few online lenders, including Prosper and LendingClub, have embraced the idea of peer-to-peer loans in the U.S.
What are peer-to-peer loans?
Peer-to-peer loans began in the hopes of connecting investors and borrowers directly. They gained popularity among the borrowers, particularly those with lower credit scores following the financial crisis of 2008, during which lenders’ lending requirements were increased. Peer-to-peer lending offered better odds to get cash.
The original “retail” type of peer-to-peer lending — in which individual customers invest in a portion of loans been expanded to include lending by institutions that involves institutions such as insurance or hedge funds are the lenders. LendingClub stopped its offer for investors who were individuals in the year 2020 and can now facilitate institutions to lend. Prosper continues to allow consumers to invest in small amounts of loans.
How does peer-to-peer lending work?
To obtain a peer-to-peer loan, the borrowers must go through the same procedure as they get one online.
Peer-to-peer lenders check for eligibility by pre-qualification, which pulls a credit report that does not influence credit scores.
Pre-qualifying lets you choose the loan amount and reason while giving your name, birth date, and address. After that, you will be able to look up your annual percentage rate as well as loan terms that you may be qualified for.
If you choose to make an application, peer-to-peer lenders, as with other lenders, verify additional aspects like your credit score and history, which includes an actual credit check.
The advantages of loans made through peer-to-peer
Peer-to-peer loans are a kind of loan online and have the following common characteristics:
- Origination fee: It is a one-time fee that peer-to-peer lenders require to pay for the costs in processing loans. The fee usually ranges between 1% and 8 percent of the amount of the loan.
- Online experience: Peer-to-peer lenders let borrowers manage everything from the lender‘s site starting with making an application for a loan, uploading documents, all the way to making loan agreements, and making monthly installments.
Because several investors may review applications for loans made through peer-to-peer, they may take longer to be funded than personal loans offered by banks or other lenders online — as long as one week in some instances.
Small-scale businesses can get loans through peer-to-peer lending
StreetShares and Funding Circle, as well as StreetShares, are peer-to-peer lenders that offer only small-business loans. FundingCircle is targeted at companies requiring funding to grow, and StreetShares is more for smaller businesses seeking working capital.
Are you able to get a peer-to-peer loan even if you have bad credit?
Peer-to-peer loans are an option for borrowers with bad credit (those who have FICO scores of 629 or less); however, they might be more expensive in terms of interest. For example, a 4-year one-time loan of $15,000 with a 28.7 percent APR would result in a payment of 529 each month and an interest rate of $10,392. It is possible to calculate the average rate and the amount of payments with the Personal loan calculator.
Although lenders such as LendingClub, Prosper, and Upstart have minimum credit scores within the fair- or bad-credit range, you could be able to get lower rates through the credit union or when you apply for loans that are secured or co-signed.
How do I pre-qualify to receive the loan peer-to-peer?
You can apply for pre-qualification for a loan through peer-to-peer to find out estimated rates and terms before you make a formal application. Pre-qualification typically requires a soft credit screening that doesn’t influence your score. It is possible to pre-qualify through IPASS and then compare loan rates and features across various lenders.