Peer To Peer Personal Loans
Options abound in regard to obtaining funding for foreseen and unforeseen expenses. In most cases, people will walk into their local branch or log-on to their preferred bank's website and submit an application for a loan. But for some people, this isn't the most ideal scenario. Maybe you have had bad experiences with a financial institution or maybe your credit score is not where you would like it to be. In those cases, peer to peer lending may be the best option for you.
Right now, many of you are probably thinking, "What is peer to peer lending?" It's actually a fairly simple concept. Peer to peer lending allows borrowers to cut banks and other financial institutions out as a middle man by borrowing from accredited investors. Plus, it's a growing industry; by 2025, the p2p lending market could increase to $150 billion. Unlike traditional institutions, p2p lending gives multiple investors the opportunity to fund your loan.
And there are a number of excellent companies offering providing peer to peer loans. However, while having a plethora of options is certainly ideal, it can lead to some confusion. Because like taking out any other loan, finding the peer to peer lending company which best suits your needs is of the utmost importance. The first steps to determining which provider best suits your needs is fairly simple. First, you'll want to determine basics like how much you want to borrow and what your credit score is. These key factors will determine which p2p lenders are ideal for you and the interest rates you can expect. In addition, a number of peer to peer lenders will consider your career prospects and whether or not you have earned a degree.
Finding the Best Interest Rates
In regard to finding the right p2p lending companies, there are a variety of determining factors which can influence your interest rate. Depending on the p2p lending sites you land on, anything from credit score to debt to income ratio, graduation status and degrees can influence your interest rate. For instance, SoFi, which is also known as Social Finance, requires its borrowers to be a graduate of an accredited Title IV university of graduate program. In addition, borrowers must be employed full-time or have a standing offer of employment to be considered. Lastly, you cannot have filed bankruptcy in the last three years. While these requirements may sound a bit specific they are ideal for young professionals with high earning potential but low credit scores. And that is what separates SoFi from other lenders. Unlike most lenders, SoFi does not weigh credit score as its primary factor and considers college graduates to be better credit risks than others. As a result, if you are a recent graduate with a poor score, a lender like SoFI may be ideal for you.
Upstart is similar to SoFi as a peer to peer lender. The company values earning potential over raw credit scores and the p2p lender, which was founded in 2014, developed an algorithm as part of its approval process and to determine your interest rate. The algorithm factors school, academic record, standardized tests and major in determining your interest rate. Scoring highly in this peer to peer lender's criteria will be reflected with a reasonable interest rate.
But there are viable options for those who may not be college graduates as well. PeerForm is a p2p lending company which specializes in financing borrowers with low credit scores at reasonable interest rates. While the majority of peer to peer companies require a minimum credit score of about 640, PeerForm will consider borrowers with scores as low as 600. So while credit score is not the primary factor for most, it does play a role. And our tool at the top of the page can give you a good idea of where your terms will fall and which peer to peer lending companies are ideal for you.
Comparing P2P Lenders
Beyond interest rates and credit scores, there are a few more options to consider when selecting the best p2p lending company for you.
Origination Fees: These fees are charged by lenders once an agreement has been agreed to between the p2p lender and the borrower. While some peer to peer companies do not charge origination fees, they are not uncommon. For example, Upstart, charges an origination fee of one to six percent of the total balance upon closing. Conversely, a company like SoFi doesn't charge an origination fee. Factors like this can and should be key determining factors as you weigh your options.
Loan terms: Like anything else, the terms of your loan vary depending on which peer to peer lender you opt for. Upstart, for instance, only offers three-year loan terms. So, for those seeking smaller loans, this likely won't be an issue. However, if you're seeking the maximum loan amount, a three-year repayment plan may not be ideal because your p2p loan will require higher monthly payments. Lending Club, another popular p2p lending company, offers repayment lengths of 12, 24, 36, 48, or 60 months. If you're seeking larger loans or repayment flexibility, Lending Club is a peer to peer company to consider. Using our tool above, you can narrow down lenders depending on your preferred repayment term.
Prepayment Fees: For many borrowers, repayment terms aren't a primary consideration because they intend to make extra payments to close their loans as quickly as possible. This is a fastidious approach to repayment but prepayment fees are something to consider before closing. Some companies charge prepayment fees as means to discourage paying off your loans ahead of schedule. The good news is that the majority of lenders do not charge prepayment fees.
Simplified Loan Comparison
We understand that shopping for the right peer to peer lender can appear to be a daunting task. There are a lot of variables to be considered which is why MoneySavingPro has done the majority of the research for you. And we believe our easy-to-use tool at the top of the page will help you efficiently and effectively narrow the field to peer to peer lender best suited for your needs.
Simply enter your credit score, the amount you want to borrow, your preferred repayment length and your home state and we'll do the rest.