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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Adamkaz/Getty Images July 26, 2022 Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Peer-to-peer lending, or P2P lending, matches borrowers with a network of investors. Unlike a traditional lender, the investors you’re connected with — a group of people (peers) or a company — decide whether to fund your loan. Although the same factors are used to evaluate your loan application as a traditional loan, the eligibility requirements often aren’t as stringent. For instance, some P2P lenders allow applicants to qualify with a credit score as low as 600. However, before you take out a peer-to-peer loan, weigh the pros against the cons to see if it makes sense based on your financial circumstances. Get pre-qualified
What is peer-to-peer lending
Peer-to-peer lending brings investors — both individuals and companies — directly to people who need to borrow money. Traditional personal loans come from institutions like banks, credit unions or online lenders. Peer-to-peer lending is when you borrow money from a person or company investing in your loan. How does peer-to-peer lending work
Most peer-to-peer loans are arranged through online lending platforms. The whole process takes place online and usually has a short turnaround time. Here’s how it works: Prequalification: See if you are eligible for a peer-to-peer loan through the site’s prequalification process. If your application is successful, a lender will give you an estimate of what the loan terms and (APR) — your interest rate, plus any fees — could be after you submit a formal application. Application: If you qualify and like the terms and rate offered, submit a formal application. Afterward, a lender will perform a hard credit check, resulting in a temporary ding to your credit score. Approval: Next, wait for a lender to decide whether to approve your loan. Funding: Once approved, your loan will move to the funding stage, where multiple investors will review your loan. Investors will either pass or agree to fund all or a portion of your loan, depending on how much you want to borrow. Electronic transfer of funds: Once your loan gets enough investors, you’ll get your money, usually through an electronic transfer. Occasionally, your funds can be deposited in as short as one business day. Loan payments: When the time comes to repay your loan, you’ll make fixed monthly payments that get disbursed to all the investors on your loan based on your repayment terms. Loan Key takeaway When shopping for a peer-to-peer loan, prequalify with as many lenders as possible to find the best deal. What fees do peer-to-peer lenders charge
The most common fee you’ll encounter with peer-to-peer lenders is an , typically up to eight percent of your loan amount. This fee is either charged upfront or taken from your total loan amount. You may also be charged late fees if you miss a payment. Other fees will depend on the lender you work with. Loan Key takeaway Before you take out a P2P loan, understand what fees, if any, it charges. An origination fee can reduce your loan amount a lot. How does it work if I want to lend money
If you would like to lend money through a peer-to-peer lending provider, you’ll create an account on your platform of choice and review the loan options and terms. There is risk associated with this investment, and some platforms will help you make decisions on individual loans while others will disperse your money automatically. You’ll be able to track loan repayment through your account. Is peer-to-peer lending safe
Peer-to-peer lending platforms are not traditional banks or online lenders, which might make you nervous about borrowing from them. That said, investors take on the most risk; if borrowers don’t repay their loans and they go into default, investors probably won’t get their money back. As far as security goes, peer-to-peer platforms safeguard your personal and financial information just as a traditional bank or online lender would. What can I use a peer-to-peer loan for
Most peer-to-peer loans are unsecured personal loans. Like personal loans from financial institutions, , like: like medical bills or a car repair Moving expenses for starting or growing a business. . Where can you get a P2P loan
There are a lot of online marketplaces that offer P2P loans. Here are some popular P2P platforms to help jumpstart your search: Funding Circle: Funding Circle connects borrowers seeking small business loans with a network of investors. It offers term loans up to $500,000 and a line of credit up to $250,000 to qualified applicants. Kiva: This not-for-profit organization connects borrowers who need money to fund their small businesses with a network of lenders who aren’t seeking a profit. Instead of using your credit score as a key factor, Kiva requires you to get a certain number of people to send you money through the platform. Once the threshold is met, your loan becomes available for public funding. Prosper: Founded in 2005, Prosper was the first peer-to-peer lender in the United States. It offers personal loans to qualified borrowers that range from $2,000 to $40,000; origination fees range from 2.41 percent to 5 percent. To qualify, you must have a minimum FICO score of 640. What are the benefits and drawbacks of peer-to-peer lending
If you’re thinking about taking out a personal loan through a peer-to-peer marketplace, make sure you know the pros and cons first. Pros
Fair credit allowed: Some peer-to-peer marketplaces allow borrowers to have credit scores as low as 600. This is good news if you don’t have great credit — or much credit at all — and can’t find a loan through other means. Quick funding process: As with all online lenders, you’ll complete your application within a few minutes, and if you’re approved, you can expect your money within a couple of days. Some banks and credit unions might take much longer to fund your loan or may require in-person applications. Cons
You might have more fees: Peer-to-peer lenders tend to charge origination fees, ranging from 1 percent to 8 percent of your loan amount. Not all charge this fee, but you’ll want to review all fees before completing an application. You could have a higher interest rate: Depending on your peer-to-peer marketplace, you might have a higher interest rate than you would with traditional lenders. Your credit score also determines your interest rate: The lower your score, the higher your rate. Shop around for the best peer-to-peer lending rates before completing an application. What is the different in peer-to-peer lending vs bank loans
The major difference between peer-to-peer loans and bank loans is who funds them. If the money comes from a lender who is an individual or a group on a web-based platform, then it’s a peer-to-peer loan. If the money comes from a credit union, bank or another financial institution, then it’s a bank loan. Many banks offer some of the lowest rates available, which is enticing for borrowers with excellent credit. If you already have an account with a traditional bank, you might want to explore personal loans through it. With that said, banks tend to have stricter qualification requirements and slower funding timelines. Loan amounts and repayment terms of bank loans and peer-to-peer loans are similar, but if you only need to borrow a little bit of money to hold you over, consider browsing peer-to-peer lenders that offer low dollar amounts. PEER-TO-PEER LOANS BANK LOANS Funds from individuals or groups of people Funds from financial institutions Flexible options for people with less credit history Stricter qualifications Online application May require an in-person application Get pre-qualified
The bottom line
While peer-to-peer lenders offer personal loans just like other financial institutions, they aren’t quite the same. This type of lending brings you directly to financial backers. It’s an investor funding your loan, not a bank. If you’re interested in this type of borrowing, the first step is to research the lenders you may be interested in working with and apply for prequalification to see if you’re eligible. After that, review the fees and terms closely to make sure a peer-to-peer loan is indeed the best choice for your financial circumstances. Learn more
SHARE: Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Related Articles