The ever increasing cost of college tuition and other fees has been troubling students for years. Acquiring private loans from banks is never an easy thing for most students. Likewise, in order to secure government loans, applicants must complete numerous documents and follow several procedures.
The Importance of Peer-to-Peer Lending
In view of the raging financial difficulty, peer-to-peer lending has emerged as the newest option for obtaining and providing cash. Peer-to-peer lending affords both creditors and lenders the option to transact business on money matters without the participation of giant financial entities. This scheme can profit many borrowers and investors worldwide through lending networks.
How Is Peer-to-Peer Lending Done?
Peer-to-peer lending is also known as microlending. As the name suggests, microlending allows modest amounts of money to be transferred between ordinary people. Lenders can confer a loan to borrowers for as little as $25. At the same time, creditors can ask for any amount ranging from a few hundred to several thousand dollars. If possible, borrowers disclose their credit information, as well as their purpose for borrowing money.
A review of the borrower’s financial situation and loan provisions will then ensue. This will help the lender understand whether the borrower is eligible or not. A loan of a single creditor may even be provided by a number of investors. Then an agreement about an interest rate will be reached by the parties involved. This explains how peer-to-peer lending benefits the investors. Discussed below are two peer-to-peer lending sites.
Lending Club
Lending Club (www.LendingClub.com) strives to help creditors gain reasonable interest rates while allowing the investors to obtain profitable returns from their investments. This is materialized by anticipating the necessity of having to deal with the intricacy and expenses of conventional banks.
Creditors with a good credit rating (i.e., having a minimum of a 660 credit score) are permitted to take advantage of a three-year term personal loan, at a flat rate, between $1,000 and $25,000. Frequently, the imposed interest rates are better than those accorded by traditional lenders. In addition, online application is free, and approval is fast.
Prosper
Prosper (www.Prosper.com) is a viable option for those who have a good credit rating. Prosper requires its creditors to have at least a 640 credit score. In addition, only U.S. citizens with bank accounts are allowed to make a bid on loans. This site acts like an auction wherein lenders contest for borrowers by offering the best interest rates on loans.
