Peer to peer (P2P) lending has been gaining in popularity — especially since the recession began. Part of the reason for this is due to the difficulty associated with getting loans from banks. Another issue is that traditional banks, in some cases, charge higher interest rates. If you are looking for a way to get a loan, in some circumstances it might make sense to turn to P2P lending.
High interest credit card debt can be draining to your finances. Additionally, consolidating that debt without some sort of secured loan can be difficult. You might not be able to consolidate all of your debt using a balance transfer credit card, you may have bad credit card discipline, or you may have to pay higher interest rates for a bank debt consolidation loan. P2P lending through a site like Lending Club or Prosper can help with this. Often, you end up with a reasonably low interest rate (based on your credit), and you can consolidate up to $25,000 of debt, and then pay it off in three years or five years.
Start a Business
Small businesses have been finding it difficult to get financing for their businesses in the current economic climate. You can get money to start a business, or to expand your current business with help from P2P lending. Business microfinance company Kiva has come to the U.S., making it possible for small businesses in America to get help similar to what has been seen in developing countries. It helps to have good credit, and a business plan, in order to get funding for your business.
Get a Personal Loan
Even for those with good credit, it can be difficult to get a good interest rate on an unsecured personal loan from the bank. If you are looking for a personal loan, in some cases it can make sense to go the P2P lending route to save money on interest. Before you apply, though, double check with your bank and compare rates. Rate comparison shopping is always important if you want to get the best deal.
College Funding Gap
When it comes to paying for college, it is best to get free money, if you can. You should also consider using a college investment account (529 or Coverdell) to help you build up money for college. After that, your best bet is government loans, since you can get low interest — some of which might be subsidized if you qualify. However, if you still can’t pay for your college education, you can use P2P lending to help you close that gap. There are special sites, like TuitionU, that are specifically designed for student loans.
Nearly anyone can benefit from P2P lending. For those who are especially interested in getting a competitive interest rate, P2P lending can be a money-saver. Those with good credit are likely to benefit the most from P2P lending, since rates can be quite low. Additionally, those who offer more details about how they will use the money are more likely to be fully funded.