Best P2P (Peer to Peer) Lending

With hundreds of loan providers to choose from, how will you know who’s the right fit for you?
Consult our chart of the top personal loans providers to find your perfect lender match.

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Advertiser Disclosure

 

Peer-to-peer lending (P2P lending) is a popular type of loan where borrowers are directly connected with investors through an internet platform – completely cutting banks out of the lending process. P2P lending has become one of the fastest growing segments in the financial industry and has emerged as a competitor to the traditional banking system.

P2P’s use of the internet reduces the operating costs that are associated with brick-and-mortar banks. Those savings are then passed on to consumers in the form of low interest rate loans. Perhaps one of the biggest differentiator for P2P is the customer experience. Borrowers can shop interest rates in the comfort of their home and become approved in minutes, not days like the traditional borrowing process of a bank.

What to Consider

Hidden Fees 

Although P2P lending provides significant advantages to both investors and borrowers, you still need to do your homework. One thing to note is there are fees involved in P2P that can range from 0.5% to 5% of the loan. Be sure to read the fine print and fully understand what the total cost of your loan will be at the end of its life.

Rise in Interest Rates 

An average interest rate of a P2P loan is roughly 15% but if you have fantastic credit you can get rates as low as 7%. Industry experts believe that if interest rates begin to increase, we will see a bubble in the lending space. However, as long as the economy is doing well and unemployment remains relatively low, the number of defaults shouldn’t raise any red flags.

Loan Term

Most P2P loans are only three to five year, fixed monthly payments. This is yet another reason these loans are becoming favored - low interest with a fixed term for the repayment.

Bad Credit? No Problem

Prior to 2008, lenders were focused on borrowers with credit scores over 640. However, some P2P sites are beginning to target those who are attempting to build or rebuild their credit. So if you’re looking to do just that, P2P lending might be the best option for you.

Regulations

As the new kid on the block, P2P lending is experiencing its share of growing pains. Prior to 2008, P2P was relatively new to the industry and lenders had fewer regulations than their industry counterparts. Since then, P2P platforms have become subject to the same federal rules that govern all consumer credit company such as Equal Credit Opportunity Act and Fair Debt Collection Practices Act. Borrowers are protected by state level regulations such as misleading advertising and discriminatory practices.

Fulfilling your dreams is important and P2P loans can be an inexpensive way to tackle multiple debts at once and get you there. We want you to make sure that it is something you are prepared for and ready to face head-on.