What Is Peer-to-Peer Lending?
Peer-to-peer (P2P) lending, sometimes called “social” or “crowd” lending, is a type of financing that connects people or entities willing to loan money with people or organizations that prefer to borrow money. As an choice to standard financing, a financial tech company (aka fintech) creates an online platform that suits loan candidates directly with investors.
Your rate and terms (and whether you qualify in the first place) are nevertheless based on frequent elements that different lenders consider. For example, your credit score, credit history, and income will each play a huge role in your capability to qualify for a P2P loan and the price you pay for financing if you do.
If you have extraordinary credit, ample income, and a low DTI ratio, you might find a good deal on a P2P loan. However, if you have credit score problems or other borrowing challenges, finding a competitive loan offer (or even qualifying at all) may be a challenge.
Types of Loans Available Through Peer-to-Peer Lending
P2P loans can be used for many of the same purposes as personal loans. Here are a few of the loan types you may locate on popular P2P websites.
- Personal Loans
- Home Improvement Loans
- Auto Loans
- Student Loans
- Medical Loans
- Business Loans
Is Peer-to-Peer Lending the Right Fit?
A P2P loan might also be a right suit for those who can’t qualify with conventional lenders or who actually choose to explore alternative financing sources. Still, undergo in thinking that in spite of the fashionable fintech setup, the P2P loan procedure isn’t notably unique from the usual one: The most creditworthy candidates will usually qualify for the lowest rates and best terms. Trying to improve your credit score may additionally work in your favor. In the meantime, shopping around for the best P2P deal might also help you save money.