Peer-to-peer lenders offer unsecured loans for up to $35,000. Rather than borrowing money from a bank, you can take out a loan from a group of small investors. The person-to-person lending market is dominated by Prosper and Lending Club. It is a different way of getting the money you need. However, but you are still going to need a good credit rating to get approval.
How to get a loan from a peer-to-peer lender
Good credit history
You will need a minimum of a fair credit rating to borrow money from peer-to-peer sites. Prosper used to lend money to people with bad credit, but default rates and resultant legal action by investors necessitated a change of approach. Lending Club will only approve people with a credit score of at least 660 and Prosper will only offer loans to people with a score of over 640. If you are unable to comply with this basic requirement, you will need to take steps to fix your credit before applying. Registering with peer-to-peer sites
You will be asked a series of questions to assess your creditworthiness. After the initial screening, you will be told the type of loans for which you are eligible. The better your credit score, the lower the APR you will be asked to pay. Who is lending me money?
Investors are the ones who are looking to achieve a better return on their investment than they would get from keeping their cash into a savings account. Over a two week period, they each provide portions of the amount of money you need until the requirements are met. This enables them to spread the risk of default. What can be done with the money?
People borrow money for debt consolidation, car financing, home improvements or to start a business.
What is the cost of peer-to-peer loans?
How to repay peer-to-peer loans?
Most people choose to repay their loan over 60 months. However, but you are free to select the repayment term. You need to ensure that there are sufficient funds in your account each month to make repayment. If there is not, you will pay a late fee. What is the rate of interest?
People who meet the requirements will pay a very competitive interest rate. Borrowers with an excellent credit history can get a person-to-person loan from Lending Club for only 6.78% APR. Consequences of default
Peer-to-peer lenders offer customers unsecured loans so you don't stand to lose any collateral. If you default, credit reference agencies will be informed and this will have negative implications for your credit score. If you are unable to repay the debt, your account will be passed to a debt collection agency.