Shop your loan around on a few sites. Since checking your rate doesn’t affect your credit score, there’s no harm in checking it on a few peer-to-peer sites. You’ll make sure you get the best rate on your loan. It’s one of the reasons why I like PersonalLoans because the website shops your loan automatically to the lenders it works with in peer-to-peer, personal loans and even traditional bank loans.
You can play around with the loan terms to change the interest rate and monthly payment. Shorter-term loans of 36-months and lower loan amounts will usually get you a better interest rate. Stretching your loan out to five years will lower your payment but might cost a little more on the rate.
Make absolutely sure you can afford the monthly payment before you accept any loan. Just like bank loans, online loans go on your credit report and missed payments will hurt your score. These are unsecured loans so you don’t have to worry about losing your house or car if you miss a payment but it will still affect your credit.
P2P lending can be risky for several reasons. It’s useful to understand the risks and provide fast solution on paying off the loan. The person or business you lend money to might not be able to pay it back or what is referred to as “defaulting”. If the default rate on a P2P website is higher, then obviously a higher chance of more people or businesses that are unable to repay their loans. Unlike bank and building society savings, the money you lend via a peer to peer website is not covered by the Financial Services Compensation Scheme. But, some P2P websites have provision or contingency funds designed to pay out if a borrower fails to fulfill their loan. These funds differ widely though depending on the site, so you have to know the facts and everything it entails if you want to be a lender yourself.
Another risk to consider is the risk of early or late repayment because you could actually make less profit than you expect. If a loan is repaid earlier than its due date, then you can you can instantly lend out the money again for more returns. The only disadvantage is that you might not be able to lend out at the same interest rate.
I’ve been using online loans and peer-to-peer for more than a decade. One of the most common questions I get is, “Are online loans safe?”
Online loan sites like PersonalLoans, Lending Club and Prosper are all regulated by the same rules as the bank down the street. They’re required to use the highest-level of internet security to keep your information safe. They’re also required to keep all the records of your loan including all your payments, even after you pay off the loan.
Investors on peer-to-peer lending sites never see the borrowers’ personal information. The only thing they see is loan details and some credit information but they Indiana laws on installment loans never see anything that could identify borrowers.