Peer to Peer Lending: Definition, P2P Options and Best Platforms
Peer-to-peer loans are a new type of borrowing and a way to get rid of the middleman. Online lenders and borrowers can find peer-to-peer lending appealing because it offers lower interest rates, has a faster approval time, and is cheaper than traditional methods. Continue reading to learn more about this innovative form of borrowing and lending.
What is Peer-to-Peer Loan?
Peer-to-peer loans are a way to borrow and lend money that is not tied to a financial institution. While some loans can be secured, most are unsecured personal loans (such as payday loans). These loans are not offered by banks or other financial institutions. Instead, they are made through a peer-to-peer lending platform. The borrower pays the origination fee to the lender for the loan. It used to be a personal loan that was given to an individual. However, small businesses are starting to get involved.
How Does a Peer-to-Peer Loan Work?
Peer-to-peer lending is a financial transaction where two people borrow money from each other and lend it to them. This occurs without the involvement or supervision of banks. Peer-to-peer loans are most popular for personal loans, but student loans and business loans are also available. Prepayment penalties can apply if your loan is not repaid on time.
How to Get Started with P2P lending
Peer-to-peer lending platforms are regulated by the Securities and Exchange Commission (SEC). These five points will help you get started with peer-to-peer loans:
- Research multiple lenders. It is important to research multiple lenders before you make a decision on a lending platform. You should consider factors like interest rates, loan terms, fees, and other costs.
- Lender or borrower. To be able to get a loan, you will need good credit. Lenders will need to determine how much risk they are willing to accept.
- Understand the risk. Lenders are always at risk of the borrower defaulting on the loan. Before you start, make sure you fully understand these risks and other risks.
- How much money do you want? How much money do you wish to borrow? Remember that you, the borrower, will be responsible for repaying your loan plus interest.
- Read the fine print. Before you sign up for a P2P platform make sure to carefully read the terms and conditions.
Top Peer-to-Peer Lenders in 2022
Are you looking for a P2P platform for personal or business use? You are not the only one. Peer-to-peer lending has seen a huge increase in popularity over the past few years. While loan amounts and availability may vary from one state to the next, peer-to-peer lending is worth looking into if you need extra cash. Here is a list of the top P2P lenders for 2022.
The Prosper online lending platform provides personal and business loans between $2,000 to $40,000 at interest rates of 7.95% to 35.99%. To be eligible for a loan, your credit score must not exceed 640.
Kiva, a non-profit P2P platform, offers loans up to $15,000. They are one of the most trusted peer-to-peer lenders and offer a 0% rate. No minimum credit score is required, and no cash flow documentation for more than one year. Additionally, collateral is not required.
HappyMoney is a peer-to-peer lender, that offers the Payoff Loan to consolidate debt. Personal loans from $5,000 to $40,000 are available at rates starting at 5.99% APR. Monthly payments will be required to repay the loan. The maximum loan term is 5 years.
MyConstant provides institutional and crypto-backed loans. Personal loans can amount to up to $50,000, and institutional loans up to $10M. The terms are between one and six months. The APR is between 6% and 8%. To get a loan, you don’t need to have a good credit rating.
Peerform provides term loans ranging from $4,000 to $25,000 at an APR of 5.99% to 29.99%. These loans are available for three years but can be extended up to five years with consolidation loans. To qualify, you will need to have a 600 credit rating.
LendingClub can fund loans of $1,000 to $40,000 for consumers and loans amounts between $5,000 and $500,000 for businesses. The interest rates are between 10.68% and 35.89%. You will need to have a minimum 600 credit score in order to be eligible for consumer loans.
Upstart provides loans starting at $1,000 and up to $50,000. They will approve loans in one business day, and they require credit scores of 620+.
StreetShares provides loans from $2,000 up to $250,000. APR rates range from 8% to 39.9% and the minimum credit score required to be approved for a loan is 540.
FundingCircle offers loans up to $500,000. The APR ranges from 10.13% to 36.0%, and the company requires a minimum credit score between 660 and 660.
The Best Peer-to-Peer Lending Options for 2022
Let’s take an in-depth look at the top peer-to-peer lending opportunities available in 2022.
1. Best P2P Lending Lending Apps
Prosper is the most popular P2P overall lending app. Prosper will allow you to get a low rate and pay at your own pace. You can also save money.
Also read: How To Find The Best Credit Card
2. Best P2P Loans for Bad Credit
Kiva is the best choice for those with bad credit who are looking for a P2P loan. They don’t require a minimum score to apply.
3. Best P2P lending for Cryptocurrency
MyConstant is an excellent option for anyone looking for a peer-to-peer lending platform that allows for loans in fiat as well as cryptocurrency. This is something that you won’t find at traditional financial institutions.
4. Best P2p Loans for Small Businesses
Funding Circle has loaned over $18 million to more than 120,000 businesses in over 700 industries since 2010. They are a great choice for small businesses.
5. Best P2P Lending Rates for Credit Card Debt
HappyMoney is an excellent platform for peer-to-peer loans, especially for those who have low credit scores. You can check your rate free of charge on their platform and it won’t affect your credit score.
6. Best P2P Online Lender
Upstart is the most trusted peer-to-peer online lender that offers personal loans as well as car refinance. They have lower rates and a transparent process that is easy to follow. There are no prepayment penalties.
7. Best P2P Lending Option Overall
Your needs will determine which lending option is best for you. It is up to you to choose what is best for your needs. Do you want the lowest interest rate? Are you in need of a loan because of bad credit? You get the idea.