Peer to peer loan is a type of loan funded by individual investors rather than the bank or financial institution. It offers a loan amount of up to $35,000 and the loan term ranges from 1 – 5 years. You can set up an automatic repayment where a fixed amount will be deducted from your bank account every month.
Credit score is not a very important factor that P2P lenders will look into when deciding whether to extend the loan. Borrowers get a chance to explain why they have a bad credit score so that the investors can judge themselves and see whether they want to lend yo the money.
It is hard to get approved for a bank loan if the credit score is lower than 700. If you have bad credit score, you still stand a chance to get approved because the P2P lender might consider other factors such as financial history and behavior.
There are much lesser fees you have to pay in a peer to peer loan compared to a bank loan. Bank loans usually charge a variety of fees such as application fee, loan processing fee, prepayment fee, fees for handling your loan documentation and etc.
Bank loans can charge an interest rate that is as high as 25% but you can easily find P2P loans with interest rates that are lower than 10%. The low operating cost of online P2P platform is the reason why there are much fewer fees. Most online P2P platforms will only charge the borrowers a processing fee.
Bank loans usually take weeks or months to get approved because of the complicated documentation process. However, P2P loans can approve the loan and release the funds in as fast as two days. To apply for a P2P loan, you simply register for an account at the P2P site and upload all the necessary documentation. You can post the loan amount that you need and watch the individual investors invest in your loan in real time.
You don’t have to visit any physical branch since the application process is completely online. It will not leave any impact on your credit score when you check the interest rate for the loan amount you want to apply for. You don’t have to reveal your name to the lender. This allows you to remain anonymous to the lenders and prevent them from calling you.
P2P loans is unsecured so you are not required to use your car or house as a collateral. Unlike bank loan, you will not get charged with any prepayment penalty if you settle the loan in full prior to the end of the loan term. If you promptly repay the loan every month, you can apply for a second loan and get approved quickly.