Peer to peer loans often will have lower interest rates, so using it to consolidate your debt can rescue you from drowning in the high interest debt that you are currently trapped in. Most P2P loans have an interest rate around 12% or lesser whereas the average interest rate of credit cards is around 25% or higher. This means that you could save a lot of money on interest when you use a P2P loan to consolidate your existing debt.
Besides, consolidating your debt with a P2P loan which may be a more reliable option than other short term loans, you often will have to make just a single payment every month. With only a single monthly payment to manage, you will no longer carelessly forget to make payment on your loan at the due date and get hit with a penalty APR or late payment fee.
P2P loans are often easier to apply for because you are borrowing from individual lenders. Since P2P platform is not bank, they do not have a strict procedure to follow. Most of the time, you just need to provide proof of a steady income, credit score that meet the minimum requirement and a decent debt to income ratio.
The loan could be funded by one or more individuals. Some individuals only lend in small amount of $50 or less so you usually need more than one individual to fund the loan. To apply for the loan, you must first post a listing on how much you want to borrow. You can watch as your loan is being funded by different individual lenders.
You don’t have to wait for the loan to be 100% funded to receive the funds. Many P2P platforms allow you to receive the funds when the loan is at least 70% funded. Just like a traditional loan, you will pay back over a period of time such as 2 – 5 years. Most P2P loans don’t charge prepayment fee so you don’t have to settle any additional fee when you pay off the loan early.
When shopping around, it is important to take into account all the fees that the P2P platform charges. Many P2P platforms charge borrowing fees that range from 1 – 6%. It will not be worthwhile to sign up if the loan costs more than your existing loan after adding up the APR interest and borrowing fees. Comparing the costs of different P2P loans in an online loans comparison search engine can help you to save time while you are doing research.
P2P loans also report your payment activities to the credit bureaus so you must remember to make payment P2Pon time every month. Doing so will raise your credit score over time. P2P loans are generally available in all states. You should check with the P2P loan site and find out whether the loan is being offered to your state.