Today’s Lending Alternative
The lending practices at work in today’s banking systems are less than ideal for borrowers. Additionally, the volatility of the today’s economy makes investing and lending anything but stable once you begin to consider interest rates and the value of the dollar. In order to avoid the risks and pitfalls that exist, people are turning towards peer-to-peer lending as a safer alternative to traditional banking and investing. These borrowing and investing systems are allowing people to consolidate debt and pay off loans and credit card bills using completely revolutionary methods.
Unlike the traditional avenues of financing for paying off loans and consolidating debt, peer-to-peer lending allows families and individuals to receive money without having to meet unrealistic financial qualifications. These practices are being carried out using online resources such as Lending Club, Zopa, and Prosper. Using these websites, borrowers can secure lower-interest loans through social media at a critical time. Despite the unorthodox approach to borrowing, people still have to abide by some general rules for lending.
Peer-to-peer lending generally takes the form of a three-year loan and is still subject to the credit score of the individuals applying for the loan. On average, these loans range anywhere from $1,000 to $25,000 per lender. Depending on factors such as credit history and the size of the loan, the interest rate can be as little as 7 percent or as high as 20 percent for each loan. However, there is always one distinct advantage for borrowers. The interest rate on the loan is always lower that that being offered on the loan that they are planning to consolidate. The result is a financial transaction in which the borrower almost always saves money.
These kinds of loans also vary from traditional loans in that there are fewer restrictions on the money. Borrowers can use the money for a huge number of enterprises that extend well beyond debt consolidation. Borrowers have turned to peer-to-peer lending for everything from new businesses to medical bills. If the need is legitimate, then there is a way that the financing can be made available on some level. However, the vast amount of loans being made are given to families who are in the process of paying down credit-card debt. This fact remains consistent with all three of the social-lending sites mentioned above.
People apply for the loans by first creating a profile and posting a range of personal information that includes financial data. Individual lenders can then browse the online profiles and choose which loans they would wish to finance. The lender can also fund the loan in whatever amount and increment that they desire. Lenders can contribute the entire amount of the loan or provide a minimum of funding at $50 per month.