Essential Things You Must Know about P2P loans

One of the newest ways of borrowing money today is the peer to peer loan or the P2P. In a P2P loan, a borrower can take a direct credit from his peers, and not from a lending institution. P2P lending is run by one person or by a group of peers that pool their resources to start the business. People also call it social loans or crowdlending. You can find several P2P lenders online, and you can check their details, such as maximum credit, interest rate, and terms of payment. By canvassing several lenders, you can make a wise decision on where to get a loan.

The Nature of P2P Loans

P2P or social lending refers to a kind of loan where people can get a loan directly from individuals or groups, instead of from financial or credit agencies. Social or peer lenders do their business online to avoid overhead expenses, and this allows them to charge interest rates that are lower than what banks and other lending institutions collect.

Another feature of social lending or crowdlending is that lenders decide whose application they should approve. If there are 100 lenders in a peer2peer group, one of them can bid to extend a loan or to invest in a form, especially for small businesses or for entrepreneurs that need more funds to start or expand a business. When a borrower pays, it goes directly to the investor rather than to a company or agency.

Some people think that social or peer2peer lending requires a personal bond or relationship between a lender and the borrower. However, such an idea is wrong because anyone can apply for credit and get approval.

Like other credit and financing companies, applicants might need to submit their credit rating, annual income, and other earnings. However, requirements may vary across lenders.

Advantages of Taking P2P Loans

People taking P2P loans can enjoy some benefits over those that borrow from banks and other credit companies.

  • Fast and convenient application

P2P borrowers use a platform to apply for credit, which makes the process quick and convenient. The website includes a list of lenders waiting to invest in borrowers, which makes approval fast, as well. Because of automation, the release of a loan can take only a few hours.

  • Low rates

P2P lenders have minimal overhead expenses so that they can afford to charge interest more economical than that required by the banks and other financing companies.

  • Loan inquiries do not affect credit score

When you inquire about loans in banks and or bad credit payday loans, it reflects in your history record and affects your credit rating. The more searches you make, the more your credit score goes down. On the other hand, looking for a loan in the P2P platform does not have the same effect on your credit history.

  • Unsecured

Borrowers in a P2P platform do not have to provide collateral to back their loans, allowing people that do not own a house or car to take a loan. Such practice allows quick approval because you do not have to wait for the company’s representative to assess your personal property before you can borrow. The traditional method of determining the amount you can borrow on the monetary value of your property does not apply anymore.

  • Flexible

One remarkable difference between a P2P loans from traditional loans is its flexibility. You are free to pay more than your monthly due if you want or to have a small balance for your monthly payments. You can pay your remaining balance anytime without paying any charges. You are free to adjust your payment schedule if there is a change in your salary schedule. As a result, you can manage your debt well.

While you can enjoy lots of advantages, having an idea as to some of its downsides can help you make a wise decision.

  • Pass credit and other checks

Applicants that have good credit ratings can enjoy fast loan approval because many P2P lenders are willing to invest in them. For people with a bad credit history, taking a loan may take time.

  • Application fee

While banks and credit companies do not collect an application fee, P2P platforms do because they have to find a lender to invest in the borrower. Part of the money you pay goes to security. In case a borrower fails to pay his loan in full, an amount from the pooled fees would cover it, reducing losses on the part of the lenders.

Now that you know how P2P lending works, you can weigh the advantages and disadvantages when deciding where to take a loan. Remember that all types of loans have their pros and cons. Instead of sending your application to the first credit company you come across, check several others. It is up to you to make a wise and beneficial choice.

Different Types of Credit Cards that Can Be Used As Loan Alternatives

Getting a loan can be challenging for unemployed and self-employed individuals. But, there are loan alternatives that they can still enjoy, such as a credit card.

For a person who wants to borrow money, a credit card can be the best option. Nowadays, cashless transactions are highly popular. Not one adult probably does not have one. People use it when they shop, dine, travel, watch a movie or a concert, pay utility and hospital bills, and get cash for things they cannot buy on credit.

Perhaps, you only have one or two credit cards, but do you know that they come in at least ten types?

Here are the types of credit cards and their features.

  • Standard Credit Card

The standard credit card is the most common type. Because it is easy to use, many people prefer to have one. You can use it to shop for food items, buy clothes and accessories, pay for cinema, concert, or plane tickets, and get cash loans when it is necessary.

You will receive a statement every month for the amount due. Usually, the total amount to pay is divided into several payments, making it easy to pay. Prompt payment without balances can save you from late payment penalties and a higher interest rate and enhance your credit score.

  • Balance Transfer Credit Card

People that uses several cards find having a balance transfer credit card convenient because it allows fund transfer to another card for free in the first 12 months, providing you a convenient way to pay several debts using one credit card as long as your balance would allow it. If you are using several credit cards from the same financial institutions, transferring funds is not possible. To avail of this privilege, try to have credit cards from different providers.

  • Student Credit Cards

Students usually keep a student credit card. Although students do not have a credit history and a credit rating yet, they can still apply and get one. The only requirement is their enrollment to a university for a four-year course. Cardholders can avail of low-interest rates on balance transfers and some rewards.

  • Rewards Credit Cards

Some people who love to shop or travel will find getting that you earn when making purchases using the credit card can come in a cashback or travel. You can redeem the cash reward or use it to buy something. People that love to travel prefer the travel points that they use to get free flights and free accommodation.

  • Cash Cards

A cash card does not put limits when you use it. However, only those with an excellent credit history can apply for it. You can spend or get cash loans as much as you want. However, you must pay in full at the end of the month so that you can use the card again. Make on-time payments to prevent charges and penalties, as well as the cancellation of your card.

  • Secured Credit Cards

People that do not have a credit history can apply for this card. You make a cash deposit for the privilege of using the card. However, the amount that you can spend must be equal to the cash that you deposited as security. Prefer you have to pay monthly to keep the security deposit and use the card again. If you do settle the mount, you cannot use the card anymore.

  • Subprime Credit Cards

People that cannot apply for a card anywhere because of their bad credit history can check issuers of subprime credits cards. However, the interest for this type of card can be higher than the standard. There are other fees to pay. However, this could be an opportunity to build your credit history so that you can eventually qualify for low-interest credit cards and loans.

  • Prepaid Credit Cards

People who want to stay within their budgets prefer to use a prepaid credit card. With this type of card, you deposit an amount that you plan to use for your monthly purchases. Once you have spent all, you cannot use it again unless you make a new deposit. If you plan not to spend beyond your budget, this card is the best for you as long as you stop buying things once you used up your deposit. Stop yourself from reloading until the next month to make sure that you stick to your budget.

  • Business Credit Cards

If you are a business owner, you can apply for a business credit card. The use of this card is strictly for business only. Having this credit card will allow a business owner to separate his personal and business expenses. However, if you apply for the card, your credit history will determine its approval. As the holler, you are responsible for paying the amount due every month.

Check all your options when looking for a credit card to use. Always consider the cost of getting one as well as the convenience that each type offers.