What is a P2P Loan?
A P2P loan or Peer to Peer loan is a loan where one person, or a group of people, provide money to another person.These type of loans are great for those who need money at a lower rate but many people don’t understand what makes them different from other loans options. These loans are like taking money from one person and lending it to another person. Unlike if you were to loan money to a friend, though, these loans are regulated by the federal government and by state governments.
How Much Can You Get?
The loan company that you choose to arrange your P2P loan will decide the limits of the loans they want to give out. Loans to an individual start at $1,000 but if you meet all of the requirements, you can get up to $35,000. Your small business can get loans starting at $15,000 and can go all the way to $300,000.
When it comes to rates, you will often find much better rates than a bank will offer you on a loan. The average APR for a P2P borrower with an outstanding credit rating is 7%. An average borrower on a peer to peer website offers a 20.7% interest rate.
Requirements for Peer to Peer Loans
Like with most types of loans, each company that offers peer to peer loans has slightly different requirements. That being said, all of the companies have similar requirements. Here are some of the basic requirements:
A Stable, Adequate Monthly Income
– Part of getting any loan is having a stable monthly income. Depending on the loan amount you are requesting, you will need to have a high enough level income to pay it off. Unlike most banks, a P2P lender will request to have your individual income, not your family income. Putting a truthful accounting of your income is important because the lender may request to see paystubs, tax returns, or other forms of verifying your income.
Adequate Credit Score
– The lowest credit score that a peer to peer lender will accept is around a 640. This is because they want to make sure that their money will be returned to them in the form of regular payments. Some companies will have a higher credit score requirement, Lending Club, for example, requires a credit score of 660.
Not Have A Blocking State
– Some states block borrowers from using a peer to peer investment. The state sometimes regulates specific lenders. Be sure to check with your P2P lender.
P2P loans come with a standard option of three-year terms or five-year terms. Payments are made monthly for an amount that is based off of your interest rate and amount borrowed. Most people love these longer terms because they allow the monthly payments to be significantly lower.
Once you have met all of the requirements, you can go to any of the websites that offer peer to peer lending and apply. Once you have applied you will hear back almost instantly from the website on whether you have been approved or not. Once you have been approved you will be able to use your money in the way that you need. You can even get a P2P loan to help fund your business.