How we review peer-to-peer lending companies
If you have been refused a loan from a physical bank or conventional online lender, you still have options to explore. Peer-to-peer funding is available to both businesses and individual applicants. It works differently from funding you may have received or requested in the past.
So how do person-to-person loans work? P2P lending sites connect potential borrowers directly with the right lenders. Instead of borrowing from a financial institution, applicants receive funding from an individual or group of investors willing to lend them money. By removing the middleman, P2P lending platforms can offer better rates and terms than traditional lenders.
However, since no two loan markets are the same, it is important to compare several peer-to-peer lending sites before choosing the best provider for your needs. To help you find the most suitable option, we have divided our methodology into two main sections. The first part is devoted to the characteristics of loans, while the second focuses on the needs of borrowers.
Peer-to-peer lending companies have only been around for less than two decades. However, the number of competing online lending marketplaces is already considerable. While most of them work the same basic way, providers can vary widely in their types of financing, loan amounts, interest rates, repayment terms, and target customers.
To help structure your research, we’ve scoured the online P2P marketplace and made a list of the most important features to consider when finding the best peer-to-peer lending site.
Types of loans offered
First of all, it’s important to mention that some P2P lending websites focus on offering business loans, while others only serve individual consumers. There are also online loan markets where businesses and individuals can find suitable financing options. However, before you check other loan features and eligibility requirements, make sure you are in the right place.
When it comes to types of financing, term loans (or installment loans) are among the most common options for both. personal and professional loans. Many peer-to-peer lenders also offer personal and business lines of credit, merchant cash advances, invoice factoring, and working capital loans. Note that some providers specialize in a single financial product, while others offer a wide variety of financing types.
One of the best features of online loan markets is that borrowers don’t have to wait months to find out if they qualify for the loan they have applied for. Not only are the best peer-to-peer lending sites processing and approving personal and business loan applications at record speed, most of them even make the funds available to the applicant in less than a few days.
The term or length of the loan is basically how much time you have to repay the money you borrow. Depending on the type of loan and the provider’s repayment policies, repayment periods can range from a few decades to a few months. In addition to the durations, we also suggest that you take into account the reimbursement conditions. To avoid late payment fees, make sure that you will be able to follow your monthly, weekly, or even daily repayment schedule.
APR and fees
When you apply for a loan in a loan market, you should also make sure that you are aware of all the peer-to-peer loan rates. The Annual Percentage Rate (APR) is there to give you an estimate of how much a loan will cost you in a year. Keep in mind that the APR is more than the interest rate. In fact, it also includes any additional costs associated with a loan, such as origination fees or closing costs. Note that some providers also charge for insufficient funds, late payments, and prepayment fees.
Guarantees and guarantees
While most personal loans are unsecured, business financing generally requires personal guarantees and collateral in the form of business assets (equipment, inventory, vehicles). Established business owners generally opt for secured loans because they offer lower interest rates, while those who are just starting out opt for unsecured financing options.
Qualifications of the borrower
When comparing the best peer-to-peer loans, it is also important to consider the eligibility requirements of multiple providers. Most loan platforms post the qualification they need on their websites. This way, potential borrowers who cannot qualify don’t have to waste time filling out applications.
Since taking out a loan is a serious responsibility, P2P platforms make sure to take several factors into account when assessing an applicant’s overall financial situation before making an offer. The most important factors include credit score, time spent in business for business applicants or years of credit history for individual applicants, and annual income.
It’s no secret that getting a loan with strong credit is much easier. However, most P2P lenders believe that a turbulent credit history shouldn’t prevent anyone from achieving their goals in the future. We’ve made sure to look at lending markets that go beyond credit score when reviewing loan applications and have been successful in finding some of the best peer-to-peer loans for bad credit.
Time in business
Another advantage of peer-to-peer business loan options is that the time requirements in doing business are not as stringent as what a bank or credit union may impose. While traditional sources of finance are only available to established businesses that have been in operation for more than a decade, peer-to-peer business loans are achievable even by those still in their infancy.
When it comes to personal loans, the lender can look at the length and stability of your credit history. The good news is that there are businesses out there that take requests, even from consumers who are just starting to build credit.
If you’ve ever looked for business or personal loans, you’ll probably know that even the best loan companies won’t offer you an offer unless you prove that you already have a good income. Luckily for potential borrowers with less than ideal financial circumstances, the best peer-to-peer lending organizations have options for young applicants and beginning entrepreneurs.