Although peer to peer lending has been gaining steady popularity among investors and borrowers alike, still there are many people who feel a bit uneasy when it comes to seeking a loan in this trending way. People who don’t feel comfortable using technology are wary of the fact that all transactions are conducted entirely online. Others are still convinced that this is the next loan scam business they can’t trust. Still others believe that they simply don’t qualify for a peer to peer loan and never bother to check whether it may be the right solution for them. (If this is the first time you are hearing of peer to peer lending, you might want to take a look at this material first for extra information on the process Lending Club).
We have outlined the peer lending process from the borrower’s perspective, so you can get a better idea of what lies ahead and decide for yourself whether it is worth trying.
Check eligibility and rates
This is the first step in determining whether P2P lending is right for you. Enter the amount you need in either Lender Club or Prosper (the most popular P2P platforms) and provide the necessary additional details. You will instantly get an estimation of annual interest rates, a loan grade that signifies its quality, the amount of monthly payments required, as well as a list of available offers for your situation.
Select an offer
Based on the information you have provided the website will return a number of offers for different loan amounts and the associated rates. It is recommendable that you pick a loan that is most closely to what you currently need and not what seems like an attractive offer. After you select an offer you are prompted to complete a profile and link it to your bank account. Keep in mind that loans are only available for 3 or 5 year periods (Lending Club).
Wait for funding
After your account is all set up on your side, your loan will be listed for investors to see and will appear in their search results if they enter matching criteria. If the amount is small (minimum 1,000 for Lending Club), generally the loan gets funded pretty quickly (especially if it is a grade A or B loan). Once the loan is fully funded, you will receive a notification about it.
Verify your identity and get the cash
Before you can cash in, you need to go through a more detailed verification process. You need to provide proof of identity, your most recent tax return and a W2 form via fax or regular mail. It is likely that you will also be contacted on the phone for further verification. Once this stage is completed successfully, you can expect to receive your full loan amount within a couple of days. Since the entire process is so transparent and there are no additional costs incurred on the borrower’s side, while at the same time offering lower interest rates than banks and credit cards, peer to peer lending might just be the future of all lending.