Peer to peer lending is an online lending marketplace that is similar to loaning or borrowing money from a friend. As a user, you can choose to borrow money, invest your money, or both. Since peer to peer lending companies have little to no overhead, they can oftentimes lend at significantly lower rates than offered by banks and other brokers.
How Peer to Peer Lending Works
Peer to peer lending is the process of lending money to a borrower at a fixed interest rate. The borrower then makes fixed monthly payments back to the lender until the term of the loan is up and the loan is paid in full, plus interest. Borrowers can quickly and easily apply online, and if approved, their loan can be funded in as little as one day. Peer to peer lending company Upstart, for example, is known for giving approved borrowers their funds by the next day.
Benefits of Peer to Peer Lending to Borrowers
If you need money fast-whether to pay for an emergency medical expense or to fix an urgent repair needed on your home-peer to peer lending companies can help. With most peer to peer loans, borrowers can receive up to $35,000 in a relatively short period of time. Peer to peer lender Sofi, though, will lend approved borrowers up to $100,000. With trusted companies, the process is always secure and you never have to worry about someone stealing your personal information. Other advantages of peer to peer lending to borrowers include:
High loan amounts at a low interest rate. This is going to be the biggest advantage to borrowers. At banks, you'll often need to put up collateral in order to receive the best interest rate possible, especially on larger loan amounts. Examples of collateral include your home, your car, jewelry, fine art, and more. With peer to peer lending, collateral is not needed, yet you can still obtain low interest rates and high loan amounts.
No prepayment penalty. Most peer to peer lenders will not charge you a prepayment penalty if you decided to pay off your loan early. As always, check with various companies when researching which lender to choose.
A good credit score isn't everything. While it's true that borrowers with excellent credit scores will lock in the best interest rates, that's not the only thing peer to peer lenders will take into consideration. Upstart, for example, also takes into consideration your job history, your education and your area of study.
The process is easy and fast. If you need money quickly, there's no better option than a peer to peer lender. Choose your desired loan amount, check the rate you'll receive and the money will be in your account in as little as one day. There are no submitting millions of documents, no waiting months to see if you're approved, and no delays in funding. Apply, receive your money and start making your payments each month.
Unemployment protection offered by some lenders. Some lenders will offer unemployment protection to protect you in the event if you were to lose your job. With Sofi, for example, they will put your payments on hold if you were to lose your job and even help you find a new job. If your job isn't as stable as you'd prefer, going with a lender like Sofi could be a great way to put your mind at ease.
Peer to peer loans are one of the quickest and safest ways for consumers to borrow money. If you're thinking about getting a loan through a peer to peer lending company, check out all of our in-depth reviews to help you make the most informed decision for your personal circumstances.