Get a loan from peer to peer lending.

With the today’s challenging economy and the difficult lending standards set by banks and other private lenders, using the so called traditional methods to paying off medical and credit card debt may be more challenging than in the recent past. Because of this many Americans are searching for new ways to consolidate their debt and pay off their credit card bills. Peer to peer lending sites, sometimes called social lending, is providing assistance by providing this alternative.

Using companies and sites such as Zopa, Prosper, and Lending Club, many families who may not have qualified for (or couldn't afford) traditional higher interest bank loans are getting fixed-rate, lower interest loans through social lending sites, also called peer-to-peer lending.

Types of debt consolidation loans offered by peer to peer lending sites

Typical borrowers are looking to consolidate their outstanding balances from credit cards with higher interest rates. The typical loan offered that can help these people is a three-year loan, and the amount provided will range anywhere from a minimum $1,000 to a maximum $25,000. There are of course conditions. For example, LendingClub will rate the loans based on an applicant’s credit score, and there are some minimum credit scores needed in order to apply. Interest rates on the debt consolidation loans will typically range from around 7 percent up to 20.1 percent, depending on a borrower’s credit history and other factors. The range is almost always lower than what the interest rate on the borrowers credit card is so the individual will still save money.

What are the loans used for?

Peer to peer (P2) loans are used for a variety of reasons and have been used for funding anything from new businesses and entrepreneurial ventures to wedding expenses and medical bills. Credit card debt consolidation also has a big demand. Families and individuals have been flocking to the web sites so they can raise cash to pay off their outstanding debts, including credit card bills. For example, at Prosper about half of all loans provided are used for debt consolidation and paying off high-interest credit card debt. Zopa has said that consolidation is the leading reason that individuals request Zopa loans. Prosper says that the simple structure of the process and the fixed-rate loan that is offered to customers can be very helpful to those working to pay off the balances on their credit cards.

 

 

 

 

How peer to peer lending sites work

Here is how they work. Anyone interested in borrowing money will create an online profile of themselves and they need to post and share a range of verifiable personal and financial information with the social lending sites. Lenders then will read through profiles and help fund the loan, whatever the reason for it, in increments of $50 or more. The interest rate paid to those lenders will provide higher returns than traditional CDs or money market accounts. The borrower will then receive the funds from the loan and can use the money for what was requested. Find other ways to get help with debt. Continue.

Does this work?

Yes. Here are some examples. Mr. Beach, who is a Los Angeles-based technical writer and who was paying at times up to nineteen percent interest rates on $2,000 in credit-card debt, sought to get help with his debt and refinance it at a local bank. However, he wasn’t getting responses from those financial institutions or banks for loans, not even at a high interest rate. He then applied at LendingClub, and he received a debt consolidation loan. He pays about 12.8 percent on a $2,000 loan. So his interest rate is 6-7% lower on the peer to peer lending site.

Another example. Ms. Mirano of Miami received a $13,000 loan from Prosper this past March to help her pay off two credit cards in which she was paying interest rates of more than 15 percent. Through the peer to peer site Prosper she was able to get a new three-year loan with an interest rate of less than 8 percent. So she was able to lower her rate by 7%, saving hundreds of dollars per year. More on Prosper loans.

 

 

 

If you fall behind on loan

Life happens, and yes, delinquencies and missed payments may occur. The lending company will try to work out a new payment plan with the borrower or they may end up sending the loan to a bill collector. This will more than likely impact your ability to use a peer to peer lending service in the future.

 

 

 

 

 

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