Peer to peer lending refers to a way of getting finances without having to involve any financial institution. There are specific platforms (also known as websites) you can use to get funding, and these vary from site to site. Let’s delve deeper and find out more about p2p and the different pros and cons of using this kind of method.
Peer to peer lending mostly takes the ‘middle man’ out of the equations, the middle man being an official financial institution such as your local bank. Peer to peer lending can be used as a funding method for your business. It will depend on your credit score. However, in some cases, you may have more of a chance at getting funding from a peer to peer lender/investor than from a bank.
Just like it is with other lending institutions, p2p also has its advantages and disadvantages; however, you must see which side outweighs the other before you make any conclusions.
Advantages of Using Peer to Peer Lending
One of the advantages of this kind of financing is that you can get a better interest rate as opposed to what you would get with banks. However, keep in mind that your credit score will either fail or qualify you for a reasonable interest rate.
Also, peer to peer lending comes with a minimum borrowing amount as opposed to what banks require. Imagine borrowing a small amount of money for the short term.
Furthermore, peer to peer lending is always the landing spot if all other lending institutions fail. In most cases, if you have been struggling to get a loan with other banks, peer to peer will always come through for you.
Disadvantages of Using Peer to Peer Lending
Before you are given any loan, they have to first consider your credit score, meaning if your credit score is poor, then your loan might come with high-interest rates. But also, if you have no other alternative, this might be your last resort.
The p2p websites require a fee for use. In most cases, they act as middlemen; that’s why they need a fee from you. It is such a risky business, and there are also possibilities of not getting your money back, especially if you are working with small businesses. You should also be ready to deal with debt collectors to secure your money.
As this form of funding becomes more popular, several websites have come up to connect lenders with borrowers. Sites such as Ratesetter, Zopa, and Funding Circle are some of the few available that you should check out.
However, note that different websites offer different services; therefore, be sure to have done thorough research to see which one best works for you.
Finding funding opportunities can be a bit tricky, especially if you have a poor credit score, and that’s why p2p lending should be on your radar. If you are stuck and feel you have run out of options for funding options, peer to peer lending is here for you. Take advantage of it.