Peer to peer lending is a way to get access to money by lending from an individual instead of a company. Because of the nature of peer to peer lending networks, there is a chance you may have an easier time getting a loan with a bad credit rating than if you went to a traditional lender.
Have you ever needed an injection of money to make ends meet until that next payday? If yes, have you ever felt that you were worse off financially after you got a loan then before? Are you beginning to lose trust in lenders and feel like they don’t have your best interests in mind? If this applies to you, you are not alone. Small personal loans that you might get when you desperately need some money are part of an industry that is known for harming its customers. These loans often fall under the category of payday loans. Payday loan companies have often been found pushing their customers deeper into debt so they need to get another loan from the same lender to pay back their debt. Pretty horrible right? If you do not trust companies like this, we don’t blame you.
If you don’t want to get a small personal loan from a payday loan lender, can you still get a loan? If you have bad credit, is there anywhere to turn to for financial help that isn’t a payday lender? Thankfully, there is. Peer to peer loans or P2P loans are an alternative to payday loans that can allow you to have access to money, even if you have bad credit.
A peer to peer loan is just what it sounds like. Instead of a company or some other type of lender lending you money, an individual loans you their own personal money instead. Because of the nature of P2P lending, there are hundreds or thousands of different peer lenders out there looking to make money by lending their money out. The abundance of lenders means that you may have a better chance of finding or negotiating a loan request that works better for you than a payday loan might.
These loans are becoming increasingly popular as time goes on. But does that mean you should get one? Let’s take a look at how P2P loans work, their pros and cons, where you can get them, and some alternatives to these loans.
Like we mentioned, P2P lending consists of a large network of individual P2P lenders and borrowers that are looking to offer or get a loan. While the process works differently from one P2P loan platform or peer lending site to the next, they generally work like this: Borrowers post a loan application and once approved, can choose from a series of individual investors where they can get their personal loans from. Borrowers and lenders are then connected and the borrower begins using the lenders money while periodically paying it back, usually from monthly payments.
On the lending side, lenders or “investors” put up their own capital for the loans. Lenders can choose the creditworthiness of borrowers they are looking for. For example, an investor could choose to only loan to individuals with great credit scores or to strictly offer loans to poorer credit scores. For the investor, the worse the credit score and credit history of the borrower, the higher interest rate the investor can charge and the more money they can make. However, the worse the credit score the higher the risk the borrower may default on the loan. On the flip side, the better the credit score of the borrower the safer the investment is but you will earn less money as a result.
On the borrowing side, the process works a little different than it might with a traditional lender. For most P2P lending platforms, the borrower fills out a loan application with your personal information as well as the loan amount you are seeking. The platform then checks your credit and processes your creditworthiness. If approved, you can then shop between potential lenders to find the loan that is best for you. The better your credit score, the lower the interest rates you will get offered compared to if you have a bad credit score. The loans on these websites are often unsecured personal loans which means you will not have to put up any collateral.
Let’s look at the pros and cons of these loans so you can decide if one is right for you.
As we mentioned before, P2P loans are a great vehicle to get a loan but are not as established and regulated as many other lending institutions. As such, you will want to be as careful as you can when picking a P2P lending platform. Here are some of our recommendations for best P2P loan websites.
Lending club is one of the most established P2P platforms around. Even though it has only been around since 2007, it makes it the longest standing P2P lending platform. When borrowing through Lending Club, you can get a personal loan of up to $40,000. Unlike many other P2P lending services, Lending Club does not only offer personal loans. You can refinance your auto loan, get financing for medical bills, or even get a business loan of up to $500,000! Obtaining the money from your loan can take a week or so but possibly longer. IF you have bad credit, Lending Club can still connect you with lenders looking to take on the risk.
Peerform is a P2P lending platform that has served thousands of investors and borrowers. Peerform offers installment loans that entail monthly or weekly loan repayments which makes them much easier to pay back than payday loans. Peerform also has no hidden fees and does not charge you for paying your loans back early.
Despite these positives, Peerform has some major negatives. First, you need at least a 600 credit score to get a loan. If you are a bad credit borrower, you won’t be able to get a loan here. The loan amounts also range from $4,000 - $25,000 which may not work for you if you only need a few hundred or thousand dollars. Also, the site interface is very old and outdated.
Upstart is a P2P loan platform that is fairly similar to Peerform, but is slightly better in our opinion. With Upstart, you can get loans of any amount from $1,000 - $50,000. Unlike Peerform, you can get much smaller loans and don’t need to borrow a minimum amount of $4,000. Further, there is a lower minimum credit score than Peerform, which can make it much more likely you can get a loan if you have bad credit. Upstart also touts that they have next day financing, which means you could get your funding much faster than both Lending Club and Peerform.
If you have bad credit but need some sort of financing, your options may be limited. While you may have a credit score that qualifies for P2P lending platforms, there is a chance you don’t. Where do you turn then? Do you turn to payday lenders known for their predatory practices?
Here at Possible, we feel that we are a superior alternative to both payday loans as well as peer to peer lending platforms. We feel that our product combines the favorable aspects of both types of financing without the drawbacks. First, our loans do not check your credit. This means that despite whatever credit score you have, there is a chance you can successfully get one of our loans. Our loans are also installment loans, which means you pay back our loan with weekly payments over the course of a month, unlike payday loans that require you to pay back the loan in one week! If you are struggling with paying back our loan, you can extend your payment date up to 29 days right within our app!
Our loans are as large as $500. If you need money but are not willing to take our loans of thousands of dollars like P2P lending platforms require, our loans can be the perfect size for you. We also offer instant deposits which means you can get your money up to a week faster with us than some P2P platforms. Likewise, we offer a competitive APR that makes our loans much cheaper than traditional payday loans.
Lastly, our loans are credit builder loans. This means that as you successfully pay back our loans, you build credit history and in turn start to increase your credit score. Since we don’t do credit checks, our loans can be a great way to both have access to cash and build your credit at the same time.
Convinced? Download our app today and get started!