The process of getting a personal loan from a peer to peer (or P2P) lending group is a bit different from getting a personal loan from a bank. Instead of applying at a bank for a loan, peer-to-peer lending sites, like ours, Peerform, fund loans by aggregating small sums lent by numerous individual lenders. For example, instead of borrowing $5,000 from a single bank, you borrow $50 from 100 different individuals. To successfully get a P2P personal loan, you’ll need to convince individual lenders to fund a portion of your loan.
How Successful Peer-to-Peer Borrowers Get Their Personal Loans Funded
How to be a Smart P2P Personal Loan Borrower
You can successfully convince lenders to fund your peer-to-peer personal loan by following some surprisingly simple and practical steps and by taking into account the most important variables that play a role in getting your loan funded. These factors include the amount of the loan, your personal credit score, and your ability to repay the loan. Assessing your current debt and figuring out the repayment amounts and schedule that you can handle are also important factors to take into account before attempting to get a personal loan.
How much Personal Loan Can You Afford?
Before applying for a personal loan, take the time to assess your current finances and debt to ensure the loan will benefit you. Answer the following questions: what is your current level of debt and how much of a personal loan can you afford? LoansCalculator.org has a handy personal loan calculator where you can plug in the loan amount, the annual interest rate, loan term, and other variables. Use a loan calculator to help you determine the total amount you will pay on the loan and calculate how much interest you can afford to pay back on the loan each month.
Factors Affecting Your Loan Application: Your Credit and Ability to Pay Back the Loan
Your credit score affects your ability to obtain a P2P loan. You typically need to have a good to excellent credit score to get a personal loan. At Peerform, we recommend you have a credit score of at least 660. You can get your current credit score from Transunion for a small fee or by using a 10 question tool from MSN Money, you can guestamate your credit score for free . An excellent credit score also gives you the added benefit of repaying a loan at an interest rate lower than what it would be with just a good or average credit score. So one of the first steps in getting a peer to peer personal loan is to get or estimate your credit score.
Lenders will also look at your debt to income ratio (DTI) before granting you a loan. The larger this ratio, the more difficult it will be for you to get a loan. Finally, the quality of your overall credit history will also play an important role in getting your peer to peer loan request funded. For example, have you been late on any payments or have you defaulted on any loan? You can order a free credit history report from AnnualCreditReport.com. While it won’t show your credit score, you can check it for errors that can hurt your credit score and cast your credit history in a bad light.
P2P Personal Loan Lenders Favor the Prepared
In sum then, the steps for successfully getting a P2P personal loan begins with researching your credit score & history to ensure you are a good candidate for the loan. Using a loan calculator can help you determine the affordability of your loan and it can assist you in determining your ability to repay. Finally, when you apply for a P2P loan, make the lenders aware of the research you’ve done in order to show your reliability and ability to make regular payments based on your income and current debts. You need to convince them you are a good candidate for receiving a loan and the best way to do that is to convince yourself first.