Peer to Peer Loans Explained
P2P (peer to peer) loans are exactly what they sound like; rather than borrowing from a bank or other formal lender, you borrow money from another person. This could be a total stranger or a family member or friend.
This is usually arranged via a website that is designed for this purpose such as prosper.com, Virgin or lendingclub.com. Basically people who have money that they are prepared to lend to others and people in need of a loan register with the site and then make the arrangement via the website.
You’ll still be charged interest – that’s how the people with the money to lend make a profit – but it won’t be as high as even your bank sometimes and definitely lower than a Payday lender. However, you do need to have a fairly good credit history to get a decent, low cost loan on P2P sites.
The site will handle the transactions, take your payments, supply a customer service contact and deal with the lender on your behalf too. They also do all the background checks on both lenders and borrowers, such as ID verification and credit checks.
The type of loans available and the length of time you may borrow over will differ but you may well find one to suit you, however big or small your loan requirement.
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