Peer to peer borrowing allows individuals or small businesses to borrow and lend cash directly from one another. P2P lenders work by eliminating the middleman between borrowers and lenders. Loans from these lending institutions tend to be more affordable for the borrowers. Read on to acquaint yourself with the several advantages of this cutting-edge type of lending.
Loan application
Tradition loans offered by major banks tend to have longer application processes. Some borrowers can even wait for two or even three months for their loans to be approved. On the other hand, P2P lending firms can take one or two weeks to process your loan. This is good for small businesses that require funding within the shortest time possible.
Interest rates
Peer to Peer lenders offer more competitive interest rates when compared to renowned banks. This is because P2P lenders usually base their rates depending on the credit history of the lender. Borrowers with a higher risk of defaulting are given higher interest rates. Some companies even offer rates as low as 6% for their loans. The lower interest rates are what makes borrowers opt for these alternative lenders.
Loan guarantees and security
When compared to banks, P2P lending usually demands for lower levels of personal guarantees and security. Peer to peer lenders will normally look at the available security that the lender has. There are also some business owners that can take loans without providing security. However, this is perceived as a high risk loan and the lenders will offer higher interest rates for it.
More credit
The operating costs of most P2P companies are usually lower than the banks. Therefore, these firms are in a better position to offer more credit. Banks tend to have higher operating costs that emanate from paying for the business’s premises and their employees. These operational costs are usually passed on to the borrowers in form of high interest rates and fees. Peer to peer lending has no hidden charges on their credits. P2P is a better and more affordable option for borrower’s especially small business owners.
Repayments periods
Repayment periods for credits from P2P lending institutions are usually shorter and can run for 3 to 5 years. This can put pressure on the cash flow of the borrower because they have to pay a higher amount monthly. However, the interest rates are usually fixed for the entire duration of the credit that you get. Therefore, a borrower does not have to worry about rising interest rates in future. Additionally, P2P loans do not have penalties for repaying the money earlier than agreed on.
Due to its charitable aspect, Peer to Peer crediting offers a true sense of a wholesome community to both the lenders and the borrowers. The P2P lending websites have active forums where information on borrowing and lending is exchanged. Creditors and borrowers can also debate on proposed policies that will ensure every party has the best experience ever. With all these benefits, P2P lending will definitely continue to be the best choice for both lenders and borrowers.
Author Bio
Jaclyn Jones is the owner of one of the best Peer to Peer lending companies. She has several years of experience handling borrowers and creditors. She has a vast knowledge of P2P and is one of the best people to deal with in the industry.
