More and more people are finding the relative ease and low application requirements with added benefits of peer to peer loans as a very viable and often helpful alternative to quick cash loans. Instead of going for the riskier payday loans or cash advance or salary loans, the many benefits of peer to peer loans is simply to irresistible to pass on.
But, how does peer to peer lending work?
There are individuals all around the world who know exactly how it feels like to get trapped in a financial quagmire. They know that the more you attempt to free yourself of the quicksand, the deeper it sucks you in. This is likened to loans.
Majority of the loans have very prohibitive interest requirements that you will be asking for a loan just to pay another loan. A lot of individuals also know the difficulty and the very impersonal manner in which banks and their so-called customer service representaties do business.
They are more or less just focused on knowing your credit score that if you simply lack the minimum level, then you are no longer entertained. They immediately tell you sorry but you have a bad credit score.
Now, peer to peer lending works pretty much like borrowing money from your friends, only this time, they are not really your friends. These so-called friends are investors or lenders who may want to share a certain amount of their wealth to finance your loan. Now, the magic term is investor. So that means that they do get something out of this. Yes, they do.
But you simply do not have to worry because the interest rates they are going to charge you is way lower than the rates you will get from banks and other lending institutions. Call it a charge from a friend.
Now, when you apply for a peer to peer loan, your application will be evaluated and assessed as to whether you have the capacity to repay your loan.
It doesn’t mean that since he is a friend, he cannot turn you down anymore. The same thing goes with peer to peer lending, if the risks are simply too high that you will not really be able to repay your loan you might not be able to get approved. Or, you may get approved but at a significant cost: either you opt for a lower loan amount or a higher interest rate.
For example, if you apply for a 10,000 USD loan, and this was approved, your request for loan will be posted on the online market platform of the peer to peer lending company. Here a lender may decide to shoulder your 10,000 USD loan or chip in as low as 500 USD. The remaining 9,500 USD will have to be sourced from other lenders as well until such time that the whole 10,000 USD amount is accumulated.
Think of it as your bunch of friends chipping in their change to make a dollar.
So technically, your loan comes from different people. And the interest rate that you will be paying will be equally divided among them often in accordance with their share of the loan amount.
Now that you know how peer to peer lending works, don’t you think it’s about time you try?