Whenever you need money for the business or for personal use, you should think carefully if it is the right option for you. Keep in mind that borrowing money will entail commitment since you need to pay the money back within a certain amount of time having interest. You should know that there is one unconventional approach to borrowing money now – P2P loan.
A P2P loan is when businesses or individuals apply for business or personal loan provided by investors. Third parties like HittaSMSLan facilitate the investors providing them with an online-based platform. If you consider this, you should understand how P2P works on your end as a borrower. The first thing that you need to do is to apply through the platform where you will enter details like credit history, employment, assessed income, and personal identity.
As soon as the P2P platform thinks that you are qualified, they will approve it. After that, the platform will pair you with one or more investors who are willing to fund your loan. The interest rate will depend on your unique credit history. The key here is to find the right lending platform. The platform should be aligned with your interests. Here are some factors to consider when you are choosing a lending platform:
Check the background and experience
Whether you are putting capital or you are borrowing, you need to check first the background and the experience of the lending team. The team should have enough credit and investment experience. Check if the team has a strong financial background so you have peace of mind that they are managing loans professionally.
The type of loan they offer
There are different types of loan that you can consider. P2P lenders are known to offer personalised rates. This means that the interest rates will be determined by your personal information. Lenders can also offer secured loan by submitting security (like vehicle and property certificates of ownership) in case you will default payments; for this type of loan, they will offer a lower interest rate.
The fees they will collect
Aside from the type of loan the lender offers, you should also contemplate about their fees. You need to know the fees so you can compare. For borrowers, you should expect upfront fees (includes risk assurance charge and credit assistance fee), monthly fees (for the loan management fee), and maximum loan amount. For investors, they need risk assurance charge (to protect their interest), lending fees (interest margin fee of 10% on the received gross interest) and taxable returns.
Know the risks involved
As with any loan, there are risks that need to be considered both by investors and borrowers. For borrowers, the risks include interest rate, fees, and no payment protection insurance. For investors, risks include late payments or default, no deposit guarantee, creditworthiness of the borrower and inability to reinvest the amount until the loan is over.
Learn the advantages and disadvantages of P2P loans
The advantages of P2P loans are the easy application process and lower interest if you have good credit. The disadvantage is smaller maximum loanable amount when compared to conventional banking institutions.