Peer to peer lending has revolutionized the way individuals and businesses apply and get approved for loans. It has taken away the hassle of having to go to different banks and lending companies to ask about their loan offers. It takes more time and effort than peer to peer lending. Peer to peer lending, on the other hand, is done online. Loan borrowers are matched with different lenders so they can get the best loan offer with the lowest rates and feasible payment terms. Since all transactions are done over the Internet, peer to peer lending companies can operate with reduced overhead costs, thus reflecting lower interest rates, which then benefit the borrower most. Most peer-to-peer lending companies offer unsecured loans, so virtually anyone who needs money — as long as they have a good credit standing — can apply for a loan from any peer-to-peer lender. But there are also secured loans for big amounts granted to businesses.
Another good thing about peer to peer lending is that you do not have to have a prior lending relationship with the lender. You can be a newbie borrower in the peer to peer lending industry and still get a chance to be lent money as long as you qualify for a loan. There are several forms of peer to peer lending that individuals and businesses take advantage of.
Form of Peer to Peer Lending
Student Loans
Student loans help college students get through their education even if they do not have the financial ability to fund their studies. Student loans are one of the most common forms of peer to peer lending. Going to college in the US can be very expensive, and not everyone who wants to have a college degree can afford it. Good thing there are a lot of lenders, peer to peer lenders included, that offer these loans to college students to help them finish their studies. These loans are paid when they join the workforce either during or after college. Many college students augment their expenses by working part time. The money they earn is spent on their immediate expenses and student loan payments.
Real Estate Loans
Real estate loans are for procuring real estate property. Real estate properties can get a little pricey especially those in prime locations, so for those who are dreaming of owning a piece of land, they can turn to peer to peer lending, and since most do not require a collateral, it is easier to buy real estate. The best peer-to-peer lending companies offer better loan deals to loan applicants compared to traditional banks offering the same.
Payday Loans
Payday loans help individuals get through the next payday. It is common for employees to run out of money before the payday comes, so they opt for this type of loan from the best peer to peer lending companies that compete to give borrowers the lowest interest rates. As the name of the loan implies, payday loans are paid on the next immediate payday, and can be applied for over and over again as the need arises.
Secured Business Loans
Secured business loans are granted to businesses that are in need of a big amount to keep their enterprise afloat. With secured business loans, a collateral is required, because a big amount is involved in the loan. The lender needs to have security should the borrower fail to repay the loan on the agreed terms. Collateral can be in the form of real estate owned by the business, vintage cars, expensive art pieces and business assets that are equivalent or near the value of the loan.
Top 5 Peer to Peer Lending Companies
Looking for the best peer to peer lending company online should not be difficult. There are numerous companies that you can check out and compare their loan offers. You do not have to go out of your home to apply for a loan. The list below is of the top 5 best companies.
Lending Club
You may ask, is the lending club legit? The answer is yes. Lending Club continues to receive very good reviews from satisfied loan borrowers. If you are wondering, is Lending Club a good investment? Then you may go online to read reviews, testimonials and information regarding Lending Club to see if they are a worthy lender. They offer huge amounts for business loans, and if you do not qualify for a business loan, you may opt to apply for a personal loan instead. Since its establishment, it has granted over $7 billion dollars in both business and personal loans, with low-interest rates fees. Looking for information regarding Lending Club’s loan offers, fees, interest rates, payment terms and whatnot can be easily accessed on the Internet. Business loans can range between $15,000 and $350,000. But if the amount is too much for you, they also have personal loans starting at $1,000 up to $35,000. You can also use these personal loans for your business should you not qualify for a business loan. 12% to 15% is the average range of interest rates in Lending Club, with APRs starting at 5.99%.
Upstart
Even if you do not have a perfect credit rating, your personal-loan-for-business loan can still get approved at Upstart. They offer loans up to $25,000 that you can use to improve your business’ cash flow or to pay off debts. Compared to other P2P lending companies, Upstart does not require too many requirements, just your credit history. They also accept loan applicants with lower credit rating, but a higher debt-to-income ratio. If you have a lower credit rating than other applicants, you can still get approved with Upstart, even if you have other outstanding debts with other lenders. Upstart’s customer service is excellent; you can call them anytime for any type of assistance and they will gladly help you every step of the way. Interest rates for personal loans range between 5% and 25%, and APRs at 6% to 30%. There is just one setback with Upstart, though. They only accept payment terms of up to three years, which may mean a higher monthly payment when your loan amount is high.
Prosper
Prosper may charge higher fees than other P2P lending companies, but its three-step verification process allows you as well as the investors to monitor your loan’s movement. There are many considerations in Lending Club vs. Prosper for borrowers because of the varying rates between the two companies. Although both are considered at the top 10 of the best P2P lending companies, Prosper may be the better choice because of better loan amount approvals. Investors also get to evaluate your loan and decide if they want to invest in your application. Should your loan application push through, you may get the proceeds after a couple of days. Prosper’s APR can be between 7% and 35%. The loan process at Prosper may take two weeks, where investors will evaluate and contribute to your loan. If investors have contributed 100% to your loan, the proceeds will be directly credited to your account. But if after 2 weeks and your loan has only reached 70% funding, you have the option to accept the amount lesser than you original application. But if it does not reach 70%, Prosper will not be able to grant your loan, but you can still reapply.
Peerform
Just like with Prosper, if your loan amount does not reach 100%, you have the choice to accept the raised amount, which is lesser than your original loan amount. Peerform can grant loans up to $25,000 at &5 to 28% APR. Peerform has lower APR compared to other peer-to-peer lending companies, which can reach up to 35%. Peerform also has lower interest rates than most P2P lenders, so if you have a less-than-perfect credit score, you may want to consider applying for a loan as low as $1,000, where you application stays active for up to 14 days. During this time is when the investors will look at your qualifications and decide of they will fund your loan.
CircleBack Lending
CircleBack Lending approves loans ranging from $3,001 to $35,000. Depending on your credit score and other requirements, you will be assigned a loan grade where the interest rates and fees will be based. Payment terms can either be three or five years. Its APR can range from 6.5% up to 36%, which is higher than most peer to peer lending companies charge. Compared to other companies, where several investors will evaluate and fund your loan, with CircleBack, there is only one investor who will fund your loan. The loan proceeds will be credited to your account after two to five days after your loan has been funded by a single investor.
Other Peer to Peer Lending Companies to Look Into
Here are other peer-to-peer lending companies that you can also check out. These companies also have varying loan offers that may be suitable for your loan needs. You can also be approved of a peer to peer lending with bad credit¸ if investors will take the risk of funding your loan based on your other factors other than your credit score.
SoFi
SoFi may grant higher loan amounts than some peer to peer lending companies, but they have strict requirements if you want to apply for a loan. Aside from your credit score, SoFi also looks into your employment history, and you must be presently employed to apply for a loan. Not everyone may apply for a loan at SoFi though, even if you have a job. You must be a graduate of a list of Title IV universities. And if you are applying for a business loan, it must be up for at least two years. The loan amount you can apply for ranges from $5,000 up to $100,000. So if you pre-qualify and the amount you are seeking for fits into SoFi’s loan amount range, then this peer to peer lending company is for you. APR is low; with a range of 5.5% to up to only 8.99%.
Pave
Pave’s interest rates on loans up to $25,000 will depend on your credit history and rating and other factors. Pave’s investors can be either be outside investors or employees of Pave themselves who want a piece of investing in loans applied within the company. Payment terms can be two or five years, with APR starting at 7% up to 35%.
Funding Circle
Funding Circle is the best peer to peer lending company for businesses that are looking to apply for a loan higher than what most P2P lending companies are offering. Funding Circle can grant up to $500,000 business loans. But because the loan amount is huge, Funding Circle requires a collateral to lessen the risk of bankruptcy to investors should borrowers fail to repay the loan on the agreed time. To qualify for a business loan, your company must have been in business for at least a couple of years, with at least a revenue of $150,000 for the past year. Interest rates can be around 6% to 20%.
BorrowersFirst
BorrowersFirst offers loans from $2,500 up to $35,000, with interest rates ranging from 6% up to 30%. This company does not have a soft credit pull on their system, so it is hard to determine if you qualify for a loan or not. Loan proceeds are credited within three to five days after approval.
Daric
You can apply for a personal loan of up to $35,000 or a business loan up to $50,000. Should you qualify for a loan, your application will be posted for fourteen days during which investors can review your loan application and decide if they want to fund your loan. if after a couple of weeks the funding has only reached 60%, you can choose to go with the lesser amount.
Things to Consider When Choosing a Lender
When you are looking for a peer-to-peer lender, you do not have to go with the very first company that you come across. You have to compare several companies and their loan offers to get the best deal out of your loan. Exhaust your options so you can land the best among the rest. Here are some things that you should keep in mind when choosing which peer to peer lending company to partner with.
Interest Rate
These peer to peer lending companies have varying interest rates; some are fixed and some are dependent on your credit score and other qualifications. In order to get the best and lowest rates, compare as much P2P lending companies as you can.
Payment Terms
Comparing payment terms is especially helpful if you are going to borrow a huge amount. There are some that only has fixed payment terms of two to three years, and if you are applying for a bigger amount, your monthly payments may be over the top and you may not be able to pay for them studiously.
Loan Amount
Apply only for the needed amount, so it is not difficult to repay it. If you are tempted to borrow more than you needed, it may prove to be a hassle during monthly payments.