You need to borrow some cash but these days your options are limited. Financial institutions are tight-fisted, credit cards and store accounts are notorious for hidden costs and misleading advertising and a quick loan from the payday lender can land you up to your neck in boiling hot water if you fail to pay it back on time. Also if you have a bad credit rating you can pretty much forget about all of the above.
Peer to peer lending may be a solution. This form of credit is conducted solely online with the intention of bringing investors and borrowers face to face. If you are an investor, you basically go to a P2P online site and deposit the amount of money you wish to invest. Investors can also choose specifically which loans they want to invest in. As a borrower you can apply for a loan. These loans can be for as little as 25 pounds, and a pay back plan is put into place. Borrowers on a P2P site are more likely to get a loan even if their credit rating is a bit wobbly. Investors also make an attractive return on the funds that they lend out. P2P lending is also attractive to investors in that they can count on a monthly return on their capital.
The application for a loan is extensive and investors can gain insight into who they are lending to through this method. Not only is the borrower’s credit rating available for perusal, but information such as the borrower’s education, test scores, monthly income, as well as existing debts are some examples of the information at hand. An investor can, for example, choose to lend money to a certain person solely because they have the potential to be gainfully employed even though they might already owe money elsewhere. This gives people the opportunity to take out credit where they otherwise would fail to meet the credit criteria, for example in a bank. Peer to peer lending brings the investors and the borrowers into direct contact with each other, cutting out a financial institution which in effect just acts as a middle man that can heap fees and charges onto the lending process. Not only that, but because the P2P system works solely online, the overheads of a conventional financial institution are circumvented. The interest rates for a quick P2P loan can range from 6 to 18 percent which is well below that of any other immediate short term loan, and the investors make an average of a 6 to 12 percent return.
The drawback to P2P lending is that there are no guarantees. As an investor your money can sit as long as it takes to find someone to borrow it during which time no interest is accrued. Also, if the site goes bust so do you and your investment, unless you are ready to go out and collect your loans manually. If an accredited financial institution goes bust at least you are guaranteed compensation of the government regulated 85 000 pounds in compensation.
This system is basically a glorified version of asking mum and dad, or a friend if they can spot you a few bucks to tide you over. Should you consider lending in this way the advice is basically to do your research and be certain you have the right site and the right people to borrow or lend off of.