Access to Cash. Peer to Peer Lending.

February 5, 2019 | Filed under: Uncategorized

Peer to Peer Lending—Unsecured Loans

Many folks starting out in the real estate game, often claim they do not have any money, or limited funds. Actually, that is far from true. If the deal in real estate is good (profitable), someone will come up with the money. A friend, associate, or business partner. 

In fact finding money can be easy. If the deal is great. One outstanding source is Peer to Peer lending. Basically, a group of investors, loans money to another group of investors.  Interest rates vary and amounts. But some folks can get a 35k in unsecured capital. They can use for any personal use: loan consolidation, education, real estate, cars, and personal items. 

After 2007/2008 when money got tight with banks and financial institutions, peer to peer thrived. Companies like Lending Club, Prosper and many others, filled the gap for consumers that needed money. An alternative to traditional lenders. As banks and lender got tighter with their money, peer to peer blossomed. 

If you have a need, peer to peer may be the solution. 

It is easy to apply.

Most are on line (see the list below). There is a short application on line. And does not go into major financial information. They will ask for:

  • Income. Do you have w2 wages (job), or 1099 income (self employed). Some are better for jobs, some self employeed. 
  • What is the reason for the loan. Many folks just say “large purchase”. 
  • Your credit score. Most need at least 640 as a minimum. There are some higher risk loans available. Many of these sites have relationships with these folks, and once you apply, you may be “transferred” to a higher risk loan provider. Just to help you out. 

Unlike banks and financial institutions, these providers do not do a hard enquire, but a “soft” look. Therefore, there is no ding on your credit score. If you do not know, what your credit score is, you can always go to  www.creditkarma.com. Which is actually free. J

Each provider has its own regulations, rules, rates, pay back period, and interest rate. But the money is available. They look for investors too. 

Some states allow P2P borrowing, while blocking P2P investors , 

You can borrow,  in most states. For example Lending Club is allowed in all but five states(Iowa, Idaho, Maine, North Dakota, and Nebraska). Prosper has no loans, in Iowa, Maine and North Dakota (You should check because things change over time). 

How much can I borrow an what are the terms? 

There are personal and business loans. Individual loans start as low as $1,000 and go up to $35,000. Small businesses, loans go from $15,000 and are capped at $100,000. 

Loans can be for anything: bill paying, consolidation, credit pay off, education, business start up, and large purchases. 

Usually payment plans are for 3-5 years, with varying interest rates.  Monthly payments. If you have great credit you might be able to get $35,000 at 5.99%. Or if your credit is bad,  $8,000 at 32%. All depends on your score, and ability to repay. 

What is great about these loans?

There are lots of pros to these loans:

  • Easy to apply for online. With immediate approvals. 
  • No credit checks or dings. 
  • Average interest rates, between 12-15. National average is 13% by the way. 
  • Easy access. They put your money in the account with in several days. 
  • Term based loans. Fixed for 3 or 5 years, with monthly payments. 
  • You can use for what ever you want or need. Not asset based. 

Should I take a loan? 

At the end of the day, this is your decision.  You must weigh the rewards and risk in borrowing money. 

Most successful financial people will say, if the RETURN, is greater than the cost of the money, it is a good decision. Here are a few examples:

  • 24 Year old borrows 20k, over 5 years to start his investment business. 
  • Person borrows money at 8% a year, and invest in Tax Liens in Texas. 25% every six months. 
  • Older couple, with out much retirement, borrows 35k at 6% to start their real estate investing and get education over the next year. To learn about foreclosures, Assisted Living Facility, and Mobile homes. 

Are there FEES?

These web sites are business’s. Of course they have to make money.  Each varies, so check them out. Usually the fees for new loans are 1.1 to 5% of the total loan. An origination fee. Really depends on the value of the loan and risk. 

Make sure you pay on time. The fees can pile up if you start to miss some payments. 

Any tips for the borrower?

  • Do your homework. Different web sites and providers have different rates. Since u are not getting a credit enquiry, compare loans. Get the lowest rate possible. 
  • Ensure you can pay for the loans. Late fees, can pile up. 
  • Loans for asset based revenue sources, is better than a depreciable asset (something that makes money each month is better than a toy—car, boat). 
  • Look for alternatives. Many credit cards, can be increased or have “zero” transfer fees or borrowing for a period of time. 

Source the loan to the type of profile you have. For example, Self Employed folks tend to do better at Lending Club than Prosper. You can check out both. Find below some of the resources for peer to peer lending. 

Peer to Peer Lending

Generally the web sites ask for: 

  • Income. Job or W2
  • Purpose. “large purchase”
  • Credit Score (generally 640 or higher).
  • Personal Information. Name, address, perhaps, ss, email, password 

www.prosper.com  (W2)

www.lendingclub.com(Self employed, 1099)

www.avant.com(Lower credit scores)

www.upstart.com(college degree, starting out). 

You can do more than one. But start with the one that best fits your conditions. 

Ask for the maximum.  They will let you know the rate, duration, and amount. 

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