There are quite a few companies out there now which offer peer to peer lending. What the company does is matches a borrower with a saver or several savers. The borrowers usually get a lower rate, than they would from a traditional lender because it cuts out the banking middle man. The money you borrow comes from individuals who are hoping to get a better return on their savings and so are prepared to take some more risk, by lending through this sort of scheme.
Borrowers are picked carefully though. There are credit checks done and every borrower is given a risk rating. This means that savers will be able to take a look and see which they will be most happy lending to. There is a chance that as a borrower you may be turned down, but as there are a few firms that offer this service you could try more than one, but being turned down for borrowing does not look good on your credit record. Someone with a low credit rating may also be giving a high interest rate to offset the risk. This could mean that it is more expensive to use peer to peer lending than going to another lender. Therefore it is worth getting some quotes first so that you can decide which will be the best for you.
Therefore it can be a good thing. If you have a good credit rating then you can get a better rate than using a bank for borrowing money which could really suit you. However, it is worth bearing in mind that if your credit score is not so good, then you could end up paying more than a bank. Therefore it is wise to examine these rates carefully before you apply and find out what your credit rating is like before you apply. There is no point in applying if you will definitely be turned down and by applying you could be making your credit record look even worse.
Many peer to peer lending companies will allow you to repay the loan early without a penalty. This is great as it means that you will be able to save money in interest if you happen to have enough money to be able to pay it off. Other lenders will often charge for this and sometimes it can be a significant amount depending on the lender and the type of loan. It is worth looking at this when you are comparing different types of lending as it could have quite an influence on the overall costs if you plan on paying back early.
They can be a great alternative if you are finding it difficult to get money elsewhere. There are something that people do not often consider but they could work out really well for you and so could be well worth thinking about.
It is important thought to look out for the fees. The company may charge you a fee for arranging the loan. The way the loans work is that you may have several people all offer to give you a small part of the money. They may not add up to the full amount and so if you have to apply again for the rest you could end up paying an additional fee as you will have to apply again.
There is also no guarantee so if you have a poor credit rating or lenders do not feel that they are willing to take a risk with you, you could end up with no loan. It is worth talking to them though and finding out whether they think it is worth you applying. You may find that even if your credit rating is not excellent you may still find someone willing to lend to you, so you could check with their customer services and see what sorts of people they tend to source lending for.
It is wise to do your research first. Peer to peer lending is relatively new and not many people have experience of it. It is something you are less likely to be able to talk to friends and family about as they are unlikely to have experienced it and so knowing what real life experiences are like is hard. You should be able to find some reviews online but also take time to compare the lenders, find out what they are like, what their terms and conditions are and how they work before you sign up to anything. Look at their websites in depth and also chat to their customer services departments so that you can find out as much as possible about how they work and what they are like. It is good to talk to them as you also get a feel for how friendly and helpful they will be should you have any problems in the future.