Those of us who are not eligible for personal loans may be concerned about the ability to borrow needed money. Perhaps you need to refinance your existing loans, or you require an injection of cash in an emergency.
Both of these scenarios could lead you to the P2P network, which is an interesting option for individuals with less than stellar credit.
What is P2P Lending?
A Peer to Peer Lending system is one where borrowers are directly borrowing money from individual lenders. Those who are unsure about the best options for P2P lending can check out websites such as Let Me Bank, which provide a lot of information on the top lenders and networks.
The goal of P2P lending is to benefit both parties. One party gets the money they need with a reasonable interest rate. Meanwhile, the second party gets the chance to make solid interest on the money they are lending out.
Perks of P2P Lending
One of the most significant advantages of P2P lending is that you get the chance to take on a lower interest loan. If you were to go into a bank to try and get a personal loan, or even apply with a debt consolidation firm, you would find they are charging much higher interest.
If you go with a P2P loan, then you are looking at a much lower interest rate. There is no overhead for a single lender, and the added fee is the small amount that would be taken by the P2P lending platform.
It is never a good idea to enter any financial arrangement if you do not have a clear idea about the terms of the loan. Not all P2P loans will have the same terms, which is why you must pay attention to the fine print before signing.
For instance, there are loans where you would have a promotional interest rate. For the first few months, you are charged a lower rate. If you pay back more of the loan in those months, your total interest payments decline.
But then you would see the interest rate going up, which can come as a surprise to some borrowers. Ensure you are reading up on the interest rate for the duration of the loan, along with any late fees as well.
Quick and Easy
The process for obtaining a P2P loan is a lot quicker than a traditional loan. Most banks and debt consolidation firms must do significant checks on each applicant before they can get the ball rolling on their loan. With P2P lending, everything happens a lot quicker. All you are doing is passing a credit check, where a credit score of 600 is enough. Then you are giving a few personal details to the lending platform so that it can match you with a borrower.
P2P Loans to Rebuild Finances
The usefulness of a P2P loan is not only to get money you need in an emergency but to pay off your present debts and reset your finances. There are countless individuals and families who are drowning in the weight of their present debt obligations.
Perhaps you have a combination of student loans and credit card debt that is close to $20,000. You are paying a lot of money in monthly installments, and the interest is high on some of these loans.
If you were to try to get a P2P loan, you would find that you are able to pay off most of these loans through your new loan. Now you can focus solely on paying off the P2P loan, which should have a lower monthly installment and interest rate.
Making New Choices
While a P2P loan is going to help you rebuild your finances, you must start to make different financial decisions as well. You cannot see your new loan as another way to spend money that you are not earning. The goal is to start saving, paying off your debt, and making smarter financial choices.
Individuals and families who learn from their mistakes are the ones who can pay off their debt, improve their credit score, and eventually qualify for enticing car loans, home loans and other financial instruments.
The short term pain of having to pay off all your debts may seem like the end of the world. But it is the beginning of a new opportunity when you can make smarter financial decisions with many more options at your disposal. That is the road that you can get on with the help of P2P lending.