In recent years, peer to peer lending has been all the rage when it comes to obtaining a personal loan. As a borrower, you can lock in a loan with a low interest rate in as little as one day. As a lender, you can choose which borrowers you want to invest in based on their credit score and borrower profile. Peer to peer lending is similar to borrowing or lending money to a friend, but without the awkwardness of actually knowing the person.
But, what if your credit isn't as high as you would like it? Do peer to peer loans for bad credit borrowers exist?
Peer to Peer Loans for Bad Credit
While borrowers with excellent credit will receive the best interest rates, peer to peer lending for bad credit borrowers do exist. For example, with peer to peer lender Prosper, borrowers can get a loan with a credit score as low as 640. They will, however, pay a higher interest rate than borrowers with credit scores above a 740.
If you have poor credit, one option is to work at raising your score before applying for a loan. Depending on your score and your circumstances, you may be able to raise your score in as little as two months. One of the first things you can do is take a look at your credit report and make sure it's accurate. If there are any discrepancies or old inquiries, call the credit bureau to have it removed from your credit report. You can also work at paying off your debt, keeping your credit card balances low (less than 30 percent of the total credit limit), and paying all of your bills on time.
But What If You Need the Money Now?
With some peer to peer lenders, though, credit score is not everything. If your credit isn't as good as you would like, check with peer to peer lender Upstart. Upstart looks at your borrower profile as a whole, as opposed to just your credit score. Factors such as employment history, education and your area of study will all be taken into consideration when qualifying you for a loan and an interest rate.
Even if you do have poor credit, interest rates with peer to peer lending are still significantly more reasonable than with other types of borrowing, such as payday loans. Payday lenders often charge an annual interest rate of more than 300 percent (sometimes more than 500 percent!), whereas peer to peer lenders typically cap out around 35 percent. While that rate is still higher than what borrowers with good credit would receive, it's much more manageable than rates in the hundreds.
If you have poor credit and need money fast, check with peer to peer lending companies first before going the payday loan route. Here at MoneySavingPro, we've conducted in-depth reviews of a variety of peer to peer lenders in hopes of matching you with the best lender for your personal financial situation. We understand that sometimes you need money in a pinch, and luckily, peer to peer lenders can help.