Personal Loan Options – P2P Alternatives To Bank Loans
Peer-to-peer lending continues to establish itself as one of the top alternatives to bank loans. Since risk-averse banks only lend to the most creditworthy borrowers, peer-to-peer lending companies stepped in and developed a model that creates a middleman between traditional banks and consumers. Peer-to-peer lending companies target borrowers who may not qualify for traditional personal loans from banks.
It all depends on the peer-to-peer lending company and their requirements. Some require good to excellent credit, while others will consider lower credit scores.
How do Peer-to-Peer Loans Work?
When you receive the funds from a P2P lender, the money actually comes from an investor or an individual and not the lending platform. Peer-to-peer lenders are companies that match you with investors or other individuals willing to loan you money. When you apply for a P2P personal loan online, the companies check your financial history along with your credit and some personal details. Based on your information, the P2P companies will match you to their network of individuals and investors offering personal loans.
The loan will be funded by multiple investors. This can be a win win situation for the borrower as well as the investor. The entire process can be done entirely online.
Who are the Top Peer-to-Peer Lenders?
The leader in P2P lending is the Lending Club with over $20 billion in loan issuance since 2007. Lending Club offers both personal and business loans for small and medium-sized companies. The loan terms range from 36 to 60 months with loan amounts on personal loans ranging from $1,000 to $40,000.
Prosper has generated over $6 billion in loans for 2 million customers since 2006. Prosper only deals in unsecured personal loans with loan amounts ranging from $2,000 to $35,000. The average interest rates range anywhere from 5 to 35 percent based on a borrower’s credit score and history. Unlike traditional banks, Lending Club and Prosper offer personal loans to consumers with less-than-stellar or bad credit.
What are the Peer-to-Peer Credit Score Requirements for Personal Loans?
The credit score requirements for peer-to-peer lending websites vary by company. For example, Lending Club’s minimum credit score requirement is 640 with the lowest interest rates going to borrowers with good credit. Lending club has taken the overhead out of giving a loan and has a very streamlined process. This allows them to have lower rates on their personal loans. But again, you will need good to excellent credit to qualify for a personal loan through Lending Club.
By contrast, another P2P lending company known as Avant offers personal loans for borrowers with credit scores as low as 580. However, Avant’s interest rates start around 9 percent if your credit score is below 620. Avant and other similar P2P websites are a great tool if you need a personal loan and you have less than stellar credit.
Explore the various peer-to-peer lending platforms, and discover how you can secure a personal loan with affordable interest rates, fees and terms. Learn how to eliminate your reliance on traditional banks and their strict loan requirements.
How Do I Apply For Peer-to-peer Personal Loans?
We have listed our top choices below based on different variables.
Lending Club – Personal Loans
Avant Personal Loans (Average/Fair Credit)
PersonalLoans.com Get matched to their lending network.