Peer to Peer lending Review: Independent Guide to Peer to Peer Loans

Our Peer to peer lending review will cover peer-to-peer loans from the side of the investor and the borrower.  P2P lending has become more popular recently, and for good reason.  It is very difficult to get traditional loan funding for personal purposes.   Most of these purposes don’t have either a specific piece of collateral (such as a house or car).  Or they don’t have a specific reason that the funding itself will make you more likely to pay the loan off (such as a better education leading to a better job).  Thus banks are very hesitant to give personal loans over a very small amount.  When they do there is usually a very high interest rate.  Enter P2P loans!

Despite the above, many credit-worthy people looking for a loan for a personal purpose are very likely to pay it off.  But the banks just don’t want to take the time to investigate and assess this worthiness.  Enter peer-to-peer lending and peer-to-peer loans.  Those investors in the peer-to-peer lending sphere are willing to determine whether they think you will pay off your peer-to-peer loans.  These investors can and do look into factors that run deeper than the project or purpose itself.  They look into other aspects of your profile that they think will make you likely to stay true to the terms.  Peer to peer loans can be a benefit to both sides.  We hope our peer-to-peer lending review provides a guide to all.

Peer to Peer Lending vs. Crowdfunding

Peer to peer lending is a subset of crowdfunding given that it still has to do with the fact the investors pool together to manage risk.  Thus one investor may spread his or her P2P lending investment around to several or even a large number of peer-to-peer loans requests in a certain area.  S/he may want to help a certain group of people, whether single parents, young homeowners, those with a certain cultural background, or retirees.  Or s/he may want to help with certain P2P lending projects such as adoption expenses, weddings, or travel.

The Economist recently had an article about peer-to-peer lending, and The Credit Union Times predicts growth in the P2P lending market.  The Economic Times covers P2P lending from the investor perspective, while Lendio covers P2P loans from the applicant side.

Welcome to our peer-to-peer lending review!

Peer to Peer Lending Types

To understand our peer-to-peer lending review you should start with understanding what types of peer-to-peer loans can you get that is for personal reasons, rather than educational or business purposes.  Here are some common examples of peer-to-peer loans:

Peer to peer lending guide

Debt consolidation Peer to peer loans.

This is one of the most popular types of P2P lending and that makes sense.  Some forms of debt such as credit card debt can carry very high interest rates.  P2P loans can be the perfect option to pay things off and save money at the same time.  You may find that debt consolidation loan funding is popular with peer-to-peer lenders.  They can often find people with solid credit scores and employment histories that just want to pay back the rest of their debt.

P2P lending for personal expenses.

Many times people turn to the crowd when they have a large one-time personal expense.  Let’s take the example of adoption.  Adopting, especially adopting a baby, can be very expensive.  Of course the expense is incredibly worthwhile, but that does not mean that all couples have that kind of money in the bank, ready to go.  Thus they need to find crowd funders who are willing to give P2P loans for adoption.  In some cases all of the money will need to be paid back, while in others some is a gift.  Sometimes there will be a caveat that says that the adoption needs to involve a higher risk situation such as a child who may present a challenge to place.

Peer to peer lending for important events.

Weddings, honeymoons, bar mitzvahs, and major anniversaries are good examples of times that people may look for P2P loans.  Let’s use wedding expenses as an example.  Perhaps that dream wedding is just out of reach.  Although you have a good job and decent overall income, the specific money in the bank is just not there.  Peer-to-peer loans for wedding expenses might do the trick.  All you need to do is convince the crowd that you’ll pay the money back.  While a traditional bank would never do this, the crowd may decide that you are worthy of this credit .  They see a and that their return may be decent even if they give you a reasonable rate.

Peer to peer lending for home improvement.

Again, let’s assume you have good credit and a decent income.  But you don’t want to refinance your mortgage or take out a home equity loan that has a variable rate.  Or maybe your mortgage is paid off.  One way or another, getting P2P loans may have better and more flexible terms and be a good fit.  In a related way people might turn to P2P lending if they need to fix something that is not covered by insurance, or have to replace a major appliance like a furnace.

Down payments using peer to peer loans.

It is not uncommon for people to lack the initial funds for a down payment on a home.  This is another place that peer-to-peer lending can be quite helpful.  The borrower may have great credit and a strong employment history, but still not have the full amount of a down payment.  P2P loans are a great for in those circumstances.

Bridge P2P loans.

Finally, there may be times when people just need a little money to carry them through a period of transition.  Maybe they just got out of graduate school and are in the process of finding that first job.  While the job is likely to be lucrative time will be needed for the money to be in the bank.  Or maybe a person just moved to a new place and while in the long run getting a job will not be hard, in the moment cash is short.  Bridge loans provide a perfect opportunity for person to person lending.

The above examples are meant to be a cross-section, since the obvious advantage of peer-to-peer lending is that the peer to peer  loans come in all shapes and sizes and fit a wide variety of purposes.  In some cases the crowdfunding comes from investors who not only want a return but also are doing this for a personal mission as well, as is often the case with adoption.  In others peer-to-peer lending comes from investors who see that you will pay the money back regardless of the project.  They are willing to take a risk that there is no collateral.

Peer to Peer Loans: Advantages

There are some obvious advantages in our peer-to-peer lending review.  Of course a lower interest rate than you would pay from a bank is the most important in many cases.  In some it would be almost impossible to get these kinds of peer-to-peer loans from a bank in the first place.   But even if the interest rate is approximately the same as one you would get for a bank on similar person to person loans, there are other reasons as well, such as:

  1. Peer to peer lending forms a relationship with the investors in many cases.  Sometimes this relationship can lead to either similar investments in the future, or increased investments for the same project.  In other words, the crowd will be more likely to invest in you in the future if you show that your purpose is worthwhile and that you keep to the terms that you agreed to.
  2. Peer to peer lending can have more flexible terms than traditional loans.  For example, peer-to-peer loans may have flexible or specially tailored repayment schedules.  They may have terms such as gradual repayment that makes the initial payments less.  You and the crowd can tailor the terms in a way that makes the most sense all around.
  3. Peer to Peer loans can sometimes include some reduced rate or even free money if the project is a charitable one or in exchange for certain perks.  You may be going to rebuild an area that was hit by a natural disaster, or you yourself may be of a group or facing a challenge that the investors want to help.

There are other advantages that may be more specific to your situation, purpose, or background.  This comprehensive peer-to-peer lending review we will try to get to many of them.

Peer to Peer Loans: Disadvantages

Of course this peer-to-peer lending review will also cover drawbacks as well.  For example, a bank will guarantee that they will pay any installments on time and with the original terms throughout your project, while peer-to-peer loans may depend on how long the crowd can afford to continue to fund you.  Also P2P lending for personal reasons will still have higher rates than other types of crowdfunding.  You still will have to afford to pay back what could be a large payment.  And finally, there could be something of an intrusiveness factor involved with peer-to-peer lending.  The investors may require more ongoing information – to which they might want to provide feedback along the way.

About Our Peer to Peer Lending Review

So, why are we here and what motivated us to provide all of this information and advice?  It’s simple: We saw that P2P lending and P2P loans were growing in popularity and there was a need for more independent and unbiased coverage that could be a guide for those looking to invest or apply.  Here is how our site is arranged:

Peer to Peer Lending Review Site

This peer-to-peer lending review has pages dedicated to many types of P2P loans from the perspective of both the investor and the borrower, including:

Investing in P2P lending

This page covers all you need to know if you would consider investing in someone who needs P2P loans.  We go over the advantages, disadvantages and process involved in P2P loans from the side of the potential investor.  Even as a borrower this section may be helpful to you in order to understand how investors are thinking.  This information may also be helpful to the borrower so you know how to present yourself for the best chance at getting funding.

Applying for P2P lending

This page covers the steps you should take if you are considering applying for peer-to-peer loans.  This includes deciding whether this path is the right one, and if it is, how to make the most compelling application.  P2P loans may be a perfect fit for your project or purpose, but there also may be other methods as well.  As above, this information may also be helpful for the other side.  Knowing why and how people apply can help inform the investor.

Best peer-to-peer lending sites

Here we go over some of the more established peer-to-peer lending sites.  We also cover how you should choose among these or others.  We are not an affiliate of any of your choices and therefore we do not profit from whatever you choose.  What we can do is provide descriptive information that can help you choose the P2P lending site that is best for you, whether you are an investor or a borrower.

Peer to peer loans types

This page covers the many types of peer-to-peer loans that are available so that investors can decide how to invest and borrowers know the full range of choices.  Our listing may not be complete since new types of peer-to-peer loans come out all the time.  Some investors may not realize what all of their choices are.  Borrowers may not realize the full range of reasons they can get P2P loans.

In addition to these pages, our peer-to-peer lending blog covers many other topics that may be relevant to your situation.  Again our information is for both prospective investors and borrowers.

The Future of P2P Lending and P2P Loans

We wonder how much P2P lending will evolve over time, given how solid the rationale is on both sides.  This type of crowdfunding allows those who have built up solid credit to get money they need even for projects or purposes that don’t have any obvious collateral.  At the same time it may allow the investors to charge a higher rate to help diversify their portfolios.  It will also be interesting to see whether certain crowdfunding investors will stick with a certain person or family.  This way they would give them renewed P2P loans for newer projects because they have proven that they will pay everything back on time.

Peer to peer lending is a strong and growing subset of crowdfunding.  We believe it may grow in popularity through word of mouth and increasing advertisement and promotion.  The advantages of these peer-to-peer loans may outweigh the drawbacks in many cases.  The number of investors may grow as people try it and see how fruitful it can be.  Best of luck if you do pursue investing in or applying.  We hope that this peer to peer lending review is helpful!