Using a debt snowball while lowering your interest rate on those debts can have a huge impact and peer to peer lending can be a practical way for you to reach that goal.
What is Peer to Peer Lending?
At its core, peer to peer lending is about people directly lending to other. It is a form of crowdfunding, but instead of money for a business, it’s for an individual.
Two fo the biggest ones in the United States are LendingClub and Prosper. Borrowers may have a very affordable solution to help consolidate high-interest debts into something more manageable.
With current rates ranging from 6.4% (A grade)-16.2% (C/D grade), there’s a good chance that you can have more of your debt snowball is going more towards the principle. This can significantly cut down on the time it takes to get rid debt.
Another benefit is that these loans are at a fixed rate, allowing you to budget accordingly and not worry about rates skyrocketing.
How Peer to Peer Lending Works
Having a peer to peer to loan doesn’t mean you’ll just be handed over money. Like bank loans, borrowers must apply and their finances should justify the loan they requesting.
Submit an application: You give your general information and finances along with the loan amount you’re seeking.
Look at terms: You may be given a couple options on the rates and loan length. The longer you carry the loan the higher the rate. Run the numbers again and choose the best terms for your situation
Provide additional documentation: You will most likely be required to send in bank statements, taxes, and pay stubs. You’ll also be asked to verify that your bank account is correct with a small transaction.
Results: If approved, the money is deposited into your bank account. If you’re rejected you’ll receive an explanation so you can improve your numbers.
The entire process can take about 5-7 business days, fairly quickly when you’re looking to consolidate.
Thoughts on Peer to Peer Loans
I’d love to hear from you – have you ever used peer to peer lending sites like Prosper or Lending Club? How did it go for you?
If you don’t have debt, but you like the idea of peer to peer loans, you may want into being an investor. Investing in peer to peer loans can be a wonderful way to earn a return on your money and help others.
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Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..