P2P lending has proven popular, and some people think that it has advantages over other types of lending. Some people even use peer-to-peer sites as an alternative to other types of loans.
Peer-to-peer loans have some advantages, but they are not the best option for everyone. Let’s compare another type of online lending, online personal loans, with peer-to-peer loans. You need to understand the details to see which option is better for your situation.
Online personal loans have many of the same conveniences as P2P loans, but they come from a lender, not from individuals.
For people with poor credit
Both these options are good for people with poor credit. Borrowers who may not qualify for a loan from a bank may still be able to get a peer-to-peer loan. They will still have to undergo a complete credit check, so even if they do qualify, they may have a very high interest rate.
Online personal lenders do not require a complete credit check, but instead look at a pay stub and bank statement during the application process. This means that poor credit is not an issue when applying for this type of loan either.
For lower amounts
Online personal loans are a better option for people who only need to borrow a small amount. If you only need to borrow a few hundred dollars, an online lender will be able to help you.
The minimum loan amounts on peer-to-peer sites vary. Some may accept an application to borrow $500, and some might have a minimum of $1,000. Generally, online personal loans are a better option for borrowing less than $1,000.
Both peer-to-peer and online personal loans are handled through a website. This means that you will be able to apply easily from your home and gather all your documents without having to go meet someone face to face.
Of course, this could be a drawback if you have questions. Before you apply for a loan of any type, make sure that the lender or the P2P website has a place where you can ask questions to support staff. Good lenders will be able to quickly answer your questions via phone, email, or chat.
Peer-to-peer loans and online personal loans are both convenient options, even for people who have poor credit scores. However, if you need to borrow a lower amount or get questions answered quickly, an online personal loan is usually a better option