New data from peer-to-peer lenders like Lending Club and Prosper Marketplace shows that many borrowers are taking on unsecured personal loans in this arena to avoid the high interest rates they’re facing with other lenders. While peer-to-peer lending is still a relatively new concept, it is gaining ground in popularity due to its low interest rates and simple processes.
What is Peer-to-Peer Lending?
Peer-to-peer lending is an internet-driven, bank-free process that allows individuals to invest their money into personal loans.
At this point, the investor acts as a lender by searching through loan requests from potential borrowers. The investor will have access to the applicant’s credit scores and other data that helps to determine creditworthiness. Afterward, the investor has the opportunity to fund a loan—or become a lender.
Current Unsecured Loan Rates
Because the interest rates are so low with this type of lending, borrowers have been flocking to these sites to see if they can have a shot at an unsecured loan. For instance, the starting APR for a personal loan with Prosper Marketplace is 7.5 percent and Lending Club is 7.89 percent. On the other hand, personal loan rates from Wells Fargo, BankRate and BBVA are 15 to 29 percent, 15.25 percent and 17.9 percent, respectively.
What if I Want to Borrow or Lend an Unsecured Loan?
If you are interested in taking part in the peer-to-peer lending process, either as a borrower or lender, you would simply compare lending sites then sign up with the one you like as a borrower or lender.
If you want to lend, this is a great place to make good returns on your investment and if you’re in need of money, you could take advantage of much lower interest rates, which saves you money over time.
Bank-free lending is becoming more popular all the time, so if you’re interested, explore whether this is a good option for you.