What is a P2P Loan?
A peer-2-peer loan is an alternative to traditional lending, in which the borrower receives a loan from another individual rather than a lending institution. Those with money to invest for profit can join a P2P lending network and give out loans to those who may not qualify elsewhere, especially those looking for a business loan when they have bad credit.
Growth of the Industry By 2013
The Gartner Research Company reports that by 2013, there will be $5 billion in outstanding business loans. That’s up 66 percent.
“Growth in P2P lending will be driven by investors seeking higher returns and borrowers shunning (or being shunned by) banks,” said the Gartner Research Company.
What Can You Use a P2P Loan For?
It can be used for personal use, small business funding and debt consolidation.
“Really it’s a nice outlet for both borrowers and lenders, and it’s going to be more and more prevalent in the future,” said Michal Herzenstein, professor of marketing at University of Delaware.
How Much Can You Typically Get
P2P loans don’t need to be huge amounts of money. Leading P2P loan companies, such as our partners Lending Club and Prosper, offer $1,000 to $35,000 for personal loans. They offer up to $35,000 for small business loans, and debt consolidation up to $35,000. Current interest rates can range from just less than 6% all the way up to just over 35 percent.
Are There Fees with P2P Loans?
P2P loans carry several fees charged to the borrower. Typically, fees for these loans are lower than traditional loans. Transaction fees are usually 1% of the sale price. Loan origination fees, which are usually included in the rate, range from 0.5% to 5.00%.