It’s often a hassle when you need to take out a loan amounting to $25,000 or less. Banks and other lending institutions often put you through the same long and tedious application procedures and tough requirements, which can make things harder for people who need money right away.
Borrowing from online social lenders is attractive to many people because these outfits usually charge lower interest rates. It also affords lenders higher profits so it’s a win-win situation for both parties. However, since it is a fairly new practice, people might be wary of borrowing money through these channels.
To the uninitiated, here is a primer on online social lending.
Better Than Banks?
Online social lending is gaining popularity and is considered by many as a viable alternative to banks. For starters, online social lenders are less restrictive when it comes to the standards they require. The response time of online lending is much quicker compared to that of banks’.
While banks may be quick to turn down loan applications, online lenders seem to listen to their borrowers’ situations more closely and take risks on them more readily. The reason why they can afford such risks is because they often partner with other lenders who share and distribute the risk.
Nowadays, banks are still the major money lenders. However, social lenders online are becoming more popular. This is can be beneficial. They are becoming a better choice for money loans to be used as business capital and to start small business.
Online Lending Sites, Pros and Cons
Popular lenders online websites have the following:
- Zopa does not charge transaction payments and provides fast application processing. However, they also refuse people who have poor credit history. Loans are awarded based on the level of credit score. That is why you have to maintain a good credit rating.
- The Lending Club is an online lending site that started in Facebook. It uses social networking platforms to generate good loan programs for you. However, like Zopa, they tend to base their interest rates on your credit score.
- Virgin Money is an online lending site that lends money between family members. It carefully documents loan agreements between parties. But if you already have other lending prospects in the family, it’s safe to bypass Virgin Money’s services.
- Last is Prosper. This website is also a site for auctions. In here, lenders bid on different interest rates. Borrowers state the amount that they are willing and capable of paying. The catch is that, it is a bit difficult to get loan through this site, for other borrowers can offer a greater interest rate compared to yours.
Conclusion
The bottom line is, social lending online is more convenient than getting a loan from other formal financial establishments. That is why it is worth the risk. However, in spite of all the good stuff you hear about this new trend, get as much information as possible. Learn about banks and other online lender sites – and decide which medium suits your needs better.
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