Peer to peer lending allows borrowers to borrow in a convenient way without heading towards a bank or this is traditional lending institution. However, you still have to pass through a credit check for the approval of the loan. You may find some restrictions are more difficult than traditional bank loans. So whenever you think of borrowing through a peer to peer lending website, it is vital to understand what you are committing to, including all the risks and benefits.
What Are P2p Loans?
Different peer to peer platforms offer different types of loans. These loans can be secured or unsecured. Typically, p2p platforms offer unsecured consumer loans that you can use to fulfil your current financial needs, such as paying medical or utility bills, home improvement or going on a holiday. On the other hand, secured p2p loans are relatively new and known as p2p property loans or bridging loans. These loans are secured against the property of the borrower and usually used to complete the purchase of a house or to renovate a home to increase its value before the sale.
How to Borrow Money Via P2p Lenders?
Peer to peer lenders offer loans through online platforms, so you do not need to make a loan application in person. To get a loan, you have to fill an application form and provide necessary information such as your name, address, source of income, amount you want to borrow and over how long. The eligibility criteria may vary from lender to lender. Generally, you must be a UK resident, 18 years or over and have a reliable income source to get the loan.
Are P2p Loans a Good Idea?
The most significant advantage of peer to peer loans is they offer a low-interest rate compared to traditional bank loans. This is because p2p platforms operate online will reduce the operating cost. Many peer to peer lending platforms offer flexibility in loan terms and also do not charge any early repayment fee. You can get quick access to cash and do not need to wait for weeks or months. Moreover, p2p platforms also offer loans to individuals who have bad credit scores and find it challenging to get a loan from banks. Although p2p loans offer a number of benefits, you must understand the loan terms before getting a loan to avoid any inconvenience.
Is Peer to Peer Loans Safe?
The major risk in p2p lending applies to the people lending money, not borrowing it. The capital is not protected by the Financial Service Compensation Scheme (FSCS), so there are more chances of losing money. However, if the borrowers miss any repayment, they have to pay late repayment fees, and it will also affect their credit file. If a borrower defaults on a loan, the company may pass the loan to a debt collection agency, and they will chase you to get the loan amount. With a secured p2p loan, borrowers have a risk of repossession. If a borrower defaults on a bridging loan, the lender has the right to sell the property to get his money back.