It was difficult to obtain financing before peer-to-peer financing. You would have to fill out a lot of paperwork. You would also have to go inside of a bank. Prosper and Lending Club, which are two of the most popular online platforms, makes it easier for people to get the funds that they need.
Jason Raiman is a financial planner who works for Financial Cranium. He has stated that many people who do not like banks and other financial institutions turn to peer-to-peer lending. Peer-to-peer lending is a great option for people who have less-than-perfect credit.
Growing Traction After Economic Crisis
Peer-to-peer lending platforms allow people to get connected to lenders. Online lenders started to grow in popularity after the 2007 to 2009 economic crisis. Many banks were reluctant to lend money to people with less-than-perfect credit. This forced people to look for other lending sources.
Lending Club began in 2007. The company has brought in $5 billion since its inception. This is only a fraction of what banks bring in, but this has not gone unnoticed by investors.
Helping People Avoid the Pitfalls of Payday Loans
Peer-to-peer lending platforms are not the same thing as payday lenders. They do not have any hidden fees, so people know exactly what they will be required to pay. Prosper requires that people have a credit score of at least 640. People can borrow up to $35,000. People typically borrow funds for three to five years.
Lending Club requires that people have a credit score of 660. People can borrow up to $100,000 for a maximum of five years. The interest rates range from 7.7 to 25 percent.
Sort of Anonymous
Michelle Tompkins is a media manager who works for a non-profit company. She turned to peer-to-peer lending when she needed funds. She was able to apply for a loan without revealing her address or name. The peer-to-peer lending platform will give a risk rating and allow investors to make bids.
The entire application process is done over the phone or online. Your looks will not be considered. Your annual income, your reasoning for taking out the loan and credit score are the only things that will be taken into consideration.
Many people still do not know about peer-to-peer lending. While this is an option in many states, people who live in North Dakota, Nebraska, Maine, Iowa and Idaho do not have this option. Peer-to-peer lending platforms plan on expanding their services.
Many people like the personal touch that comes along with having a peer-to-peer lender. For example, when Michelle maid a payment, she got a note from her lender. She has stated that the process was more pleasant than dealing with a traditional lender.