Get a Personal Loan from P2P Lender

[Jun 5, 2010.]

 

The peer-to-peer (P2P) lending market is going strong as many borrowers find themselves unable to qualify for personal loans from banks. Lending Club said it funded more than $10 million in loans in May, which is the first time a P2P company has funded that many loans in a month.

“Customers are getting back on their feet and looking to get rid of their high interest rate credit card debt.  Banks still aren’t helping, so an increasing number of customers are coming to us for an easy, lower interest option without the fine print,” Renaud Laplanche, CEO of Lending Club, said in a statement.

Who Can Get a Personal Loan?

Getting a loan trough a P2P site like Lending Club or Prosper can be much less stressful than trying to borrow from a bank. P2P loans are basically funded by a group of strangers who are looking to earn a return on their investment. You apply for the money and state the highest interest rate you are willing to pay. Anyone who wants to take a chance on you agrees to fund a small portion of the loan at the interest rate they are willing to accept. Eventually, enough investors are pooled to provide funds for the full amount of the personal loan you requested.

Unsecured Personal Loans

Because these are unsecured personal loans there is a risk that the money won't be paid back, and investors know that.  But when you apply for funds, your credit score is checked. Your debt-to-income ratio and employment history also are evaluated. Borrowers with higher credit scores receive the most competitive loan rates. Not everyone who applies for a P2P loan receives one.

Personal Loans from Friends

If you are turned down for a personal loan from a P2P lender, you can always try to set up a loan from family and friends. Virgin Money allows you to set up a loan agreement with your personal network of lenders so you don't have to rely on the generosity of strangers. Having a contract protects you and the people who choose to loan money.

Getting money through social lending  works for many people because the interest is fixed for the duration of the loan. Prosper loans, for instance, must be paid back over a three-year term but can be repaid early with no penalty. Lending Club offers loans for three or five years.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.