While banks have continued to refuse loans for the last few years no matter what the reason, online brokers and loan companies have sprung up on a regular basis.
Borrowing money online has become fast and simple but you need to be sure you use a company where all the charges are transparent.
A new type of loan is also seeing a real growth in popularity, the peer to peer loan. If you haven’t come across this type of loan before here are the main principles of this sort of package:
Various types of investor – personal, commercial or entrepreneurs – invest money for peer to peer lending. Their money is loaned to borrowers and the investors get a good return on their money while the borrowers get a loan at a competitive rate of interest.
Peer to peer loans
These types of loans are not the same as pay-day loans nor do they have the same bad press.
While the loan is unsecured the borrower has to ‘pass’ certain criteria to be considered for this type of loan. The most import of these is that they must have a clean credit history which means that no defaults or CCJs marring a credit history will be accepted. If you understand the strange scoring of the credit agencies, typically peer to peer lenders are looking for scores in the region of 400 (Equifax) to 720 (Experian) as starting scores.
Importantly borrowers need to have an adequate income which will mean they are capable of repayments. We are talking about incomes in the region of £14,500 and above.
Unsecured peer to peer loans of up to £25,000 can be applied for and no less than £1,000 borrowed. Borrowers do not need to own their own home but there are some restrictions on age. You must be 24 or older to apply and there is a generous upper age limit of 72 when the application is made.
It doesn’t matter where you live in the UK, you are as eligible as any one else and that includes the often excluded Northern Ireland.
With no early repayment penalties or charges, borrowers have been known to use this type of loan for bridging periods of time i.e. while they are waiting for their home to sell to invest in the purchase of a new home.
That all important APR
Of course there will be a cost for using ‘someone else’s money’. In general terms, as we mentioned, the APR or interest rate is competitive although smaller loans over a short period of time may be proportionately more expensive as the fees play a larger part in the overall percentage. For larger loans of £15,000 or more you can expect APRs in the region of 8 – 10% and loans between £5,000 and £15,000 may notch up APRs of 6 – 9%.
Just be certain to pick a company that is transparent about what the cost of peer to peer loans is likely to be. Once you’re satisfied, we say ‘what are you waiting for’?
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Bill Turner is a free-lance writer and consultant. He has experience writing for the press but specialises in guest blogging. He is a happily married man who enjoys sea front living on the coast of England.