In recent years, one type of loan that seems to have taken the lending market by storm is peer-to-peer lending. It’s widely popular in the UK and has now become a popular alternative to traditional loans. But what exactly is this type of lending? Is it really cheaper than bank loans? Is it suitable for your personal circumstance? To answer these questions, here’s your quick guide to peer-to-peer lending:
What is peer-to-peer lending?
Peer-to-peer lending is a type of lending money where borrowers go directly to the lender. This means no more middlemen hence the rates are generally cheaper than traditional loans. There are lending sites specializing in these types of transactions where borrowers can request for a specific loan amount. The lender then responds and offers you a loan at more flexible terms and more competitive rates.
Are peer-to-peer loans really cheaper?
One of the best things about peer-to-peer lending is the cheaper rate. Since lenders can earn higher profits this way than saving their money, the rates are usually kept to a minimum. If the rate for a standard £2000 loan is 12% APR, for example, the same loan when borrowed through peer-to-peer lending will only have a rep APR between 6.9 and 7.9%.
Who is it for?
Peer-to-peer lending is for anyone of legal age and a UK resident who is looking for a cheaper personal loan. Even if you have bad credit and you’ve been refused a loan elsewhere, you can still apply. And the best part, your application won’t leave a mark on your credit file even if you’re refused the loan. Another upside is the fact that these types of loans promise flexible repayment terms. Early repayment is generally possible without any associated charges or fees.