Applying for a peer to peer loan
- May 21, 2016
- 2 min read
Peer-to-peer lending (abbreviated P2P lending), is the practice of lending money to individuals or businesses through online platforms that match lenders directly with borrowers.
Since the peer-to-peer lending companies offering these services operate entirely online, they can run with lower overhead and provide the service more cheaply than traditional banks. As a result, lenders often earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates, even after the P2P lending platform has taken their fee.
Also known as crowdlending, peer-to-peer (p2p) loans include personal, student loans, commercial, real estate loans, business loans, leasing, and factoring
The biggest difference between peer-to-peer (p2p) lenders and banks is that the loans are backed by everyday investors. Think of them as Uber loans.
What do I need to qualify for a loan?
Peer-to-peer (p2p) lenders require borrowers to fill out an application for loans online. If approved, your interest rate will depend on your credit score, loan amount, loan term, and credit usage and history.
Because each country has its own regulations about investing, borrowing and investing from P2P lenders isn’t allowed everywhere. Some countries may allow P2P borrowing, while blocking P2P investing, and vice versa.
How much can I borrow?
Personal loans range is €1,000-$30,000. For small businesses, loans start at €15,000 and are capped at €200,000. Loans are issued with 3-5 year terms and monthly payments.
What’s so great about Peer to Peer loans?
The biggest draw for P2P loans are their interest rates - 7-15%. That being said, the more risky a borrower appears, the higher their rates will be — just like a traditional mortgage lender or credit card issuer. The fact that they’re term-based is another reason to favor them over traditional bank loans.
How long will it take to pay my loan off?
P2P loans are issued with three- or five-year terms, with monthly payments.
Any hidden fees?
Peer-to-peer (p2p) lenders charge 1-6% fees for new loans, depending on the size of the loan. The origination fee is included in your APR and subtracted from your total loan balance before you receive it.
If you’re late on payments, however, fees start to pile up.
Any tips?
You never want to take out a loan that is more than you actually need. Like any type of loan, whether it’s from a bank or a P2P lender, falling behind on payments means paying even more in the long term.
Take out the shortest term loans. Shorter terms means lower interest payments. The five-year loan might sound better because it has a lower monthly payment, but your interest bill is going to be a lot more.”
P2P loans can be an inexpensive way to tackle many debts at once.
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