Loan to consolidate debt from peer to peer lenders.
Find how to get a loan from a peer to peer lending company to help consolidate higher interest rate debt. The P2P concept can be an effective option for people with lower credit scores or multiple accounts. Peer to peer lending sites, sometimes called social lending, can be used to help consolidate medical, credit card, payday or other debts or loans. Learn about peer to peer lending for debt consolidation.
Low-income borrowers, the un-banked or people with lower or bad credit scores often have challenges consolidating debt. This is due to the lending standards set by banks as well as other private lenders. As using the so called traditional methods for consolidating or paying off medical, credit card debt or loans (payday, title, etc.) may be challenging using a bank. This is where peer to peer loans may be helpful as they can address that need. Peer to peer lending sites / social lenders, is providing this alternative.
What peer to peer lending sites offer debt consolidation loans?
There are several P2P companies that offer debt consolidation loans. Online companies (websites) such as Zopa, Upstart, Prosper, SoLo, and Lending Club, offer funds. 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 these peer-to-peer lending sites.
The peer to peer lending companies that offer debt consolidation loans each have their focus. For example, SoLo and Upstart will tend to focus on borrowers with limited or no credit history or that do not even have a bank account. Prosper will tend to focus on approving application for a debt consolidation loan in less time, but this will be for borrowers with more decent credit scores. So while there are multiple P2P lenders, they each have a focus. Look here for loans for the under or unbanked.
Types of debt consolidation loans offered by peer to peer lending companies
Typical borrowers are looking to consolidate their outstanding balances from credit cards with higher interest rates Some people need help with medical debt or predatory loans, such as car title, cash advance, pawn shop or payday loan. A peer to peer company will offer solutions for them too.
The typical debt consolidation loan from a peer to peer website can help these people for a three-year period of time, and the amount provided will range anywhere from a minimum $500 to a maximum $25,000. There are of course conditions that need to be met by the applicant.
In order to use this peer to peer lending companies there are often some minimum credit scores needed from the applicant, but as noted each lender has their own focus. Interest rates on the peer to peer debt consolidation loans will typically range from around 2 percent up to 22 percent, depending on a borrower’s credit history and other factors. The range is almost always lower than what the interest rate on the applicant’s credit card or other loan is so the individual will still save money, which is what consolidation is all about.
Types of debt that can be consolidated by P2P loans
Borrowers take on debt for many reasons, whether for personal reasons, education, a business, medical hardship, buying a car or countless other reasons. Peer to peer (P2P) loans can used for consolidating the debt on all those bills - anything from new businesses or entrepreneurial ventures to wedding expenses and medical bills. Credit card debt consolidation also has a big demand. But really any bill or debt (business, personal, payday loan, etc.) can be paid using a social network lender.
Families and individuals, no matter their income or credit, 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 as well as paying off high-interest credit card debt. Zopa also has a major debt consolidation service. SoLo offer debt consolidation for people with no or bad credit, with a focus on people of color, immigrants and the unbanked too. Learn more on SoLo loans.
LendingClub has a variety of debt consolidation products too, including for car loans, credit cards, and other forms of debt. The interest rates will vary often be significantly lower that what the applicant is currently paying, and look here for LendingClub loans.
How peer to peer lending sites work
Each lender is different, but in general, here is how peer to peer debt consolidation works. Anyone interested in borrowing money to consolidate debt will create an online profile of themselves. As part of this process, they will need to post and also share a range of verifiable personal and financial information, including their credit status, total debt obligation and income. The information will be verified as part of the peer to peer loan debt consolidation process.
Lenders (which is a person or business who wants to lend money/invest) 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.
Examples of Peer to Peer loans consolidating debts
The process can be effective - if the borrower does their part.. Here are some examples of successful P2P debt consolidation. There was a client of Lending Club who was paying at times up to nineteen percent interest rates on $2,000 in credit-card debt. This customer sought to get help with his debt and refinance it at a local bank. However, the person wasn’t getting responses from those financial institutions or banks for loans, not even at a high interest rate.
The client then researched the various peer to peer lenders and their debt consolidation products. They then applied at LendingClub, and the customer received a debt consolidation loan with a 12.8 percent interest rate. This was for the entire $2,000 loan balance. So the interest rate is 6-7% lower on the peer to peer lending site, and that allowed the client to consolidate their debts and address other financial needs.
Another example is a borrower who received a $13,000 loan from Prosper to help pay off two credit cards in which the person was paying interest rates of more than 15 percent. The social lender allowed the client to consolidate the accounts. Through the peer to peer site Prosper the individual was able to get a new three-year loan with an interest rate of less than 8 percent. So the client was able to lower their rate by 7%, saving hundreds of dollars per year. More on Prosper loans.
Peer to peer lending can help consolidate debt
While there is never any guarantee to having success with P2P loans, and applicants need to do their part of living within their means, the fact is a peer to peer loan will often help pay down and/or consolidate debt at a lower interest rate. These P2P companies offer a variety of options to borrowers, and applicants need to compare interest rates, what personal information they need to review, application terms and more - always read the fine print.
While peer to peer debt consolidation can help, remember that P2P loans are almost always unsecured. So while access to the funds may be easier or rates more competitive than traditional banking products, the terms of each loan issued are closely tied to creditworthiness, based on what an “investor” will offer and other personal financial factors.
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