Peer to peer (P2P) lending is also known as "social lending" that allows individuals lend and borrow money directly from each other. One thing that is good about P2P lending, it eliminates financial intermediaries such as banks and credit unions. It boosts the returns for individuals who lend capital and reduces interest rates for those who borrow it.
It may be considered that peer to peer lending can be the answer to all kinds of situations in which you need to get your hands on some cash. The cash you borrowed can be used in activities such as consolidate debt, start a small business, buy a car, pay mortgage loan, or even replacing some broken home appliances.
Below are the advantages of getting peer to peer lending for your personal needs:
One of the biggest advantages of P2P lending is that you can get approved easier than if you were working with a traditional lender. In most cases, you will have access to a large network of lenders to work with. Even though some of them may be skeptical of working with people who have bad credit, there will usually be several that will be willing to extend financing.
Freedom to Commit
The lenders can set a term limit to lend money through P2P and withdraw their investment when they want. Some websites allow you to close contracts when there is another lender available to finance your existing loans.
No Hidden Fees
Since peer-to-peer lending occurs between two individuals rather than between an individual and an institution, there are typically fewer fees. There is typically no need for a processing fee, an application fee, or other similar fees. One of the major appeals of the peer-to-peer lending system is the lower interest rates. This not only helps the borrower save money but also helps the lenders save some money as well. With lower interest costs and no hidden fees, the borrower is able to pay the lender back much quicker than they might be able to repay a bank loan. Both the lender and the borrow win in that situation.
Very High Potential Returns
Peer-to-peer lending can have the potential of being high-yield investments. Additionally, these investments are quite short, typically lasting 12 months. Lenders can easily and quickly acquire your initial investment. This is also considered to be quite a good investment. The percentage of return is considered high, especially when compared to a street-level savings account with your bank.
Reasonable Interest Rates
The second benefit is the reasonable bank-like interest rates. Approved borrowers will be offered several different payback timelines that range from one, three, or five years. The interest rate is accordingly adjusted up or down based on the term selected.
When you apply for a peer to peer loan, one of the great benefits you can look forward to is the speed of the funding. Generally speaking, on average, it can take anywhere from one to three weeks to receive the money for your loan. The exact time you receive the funds depends on the size of the loan.
Loans are unsecured, so you do not have to provide collateral such as the title of your home or your car.