Brought to you by: Breez DeGuzman

Household appliances won’t last forever, so you may need a loan to purchase a new one. Most likely you’ll get financing through the lending company used by the store. If you need financing for a new vehicle, you may consider going to your local bank or credit union. When you want to buy a home, you probably look for a mortgage broker. These are all good methods of obtaining financing to meet situations life throws at you. However, instead of trying one of these methods, you may want to consider the advantages of peer-to-peer lending.

P2P, also known as social or person-to-person lending, is a method of obtaining financing which occurs between two individuals (“peers”) rather than someone seeking it from traditional financial institutions. It totally removes the middleman from the lending equation; however, this type of lending is uncommon and therefore may take more time and risk to obtain.

This type of lending may have been common in the not-too-distant past when you first went to family or friends to get the help you needed. Then you would apply for a loan with the local bank where you held an account. With the influx of larger banks and loan companies, many people have become accustomed to seeking financial help from these avenues.

Now, thanks to the availability of the internet, peer-to-peer lending is making a comeback, but with some major differences. There are two major models in this type of internet lending: “online marketplace” and “family and friend” models. Internet marketplace P2P uses an auction-like process where several lenders bid with lower interest rates and the lender with the lowest rate wins the loan. Family and friend P2P lending, on the other hand, is a means whereby entities that already have a relationship work together to establish and formalize a personal loan.

Some advantages of peer-to-peer lending include, but are not limited, to:

* Being more personal. Borrowers are able to explain why they deserve to get a loan.

* Limited overhead charges. Because the transaction is handled online, the costs involved with having a brick and mortar building are not applicable.

* Lower credit score requirements. With many P2P transactions, individuals with credit scores as low as 520 may still be able to obtain funding.

* Avoiding the need for a co-signer. In most cases, a co-signer will not be required for P2P lending. There may be some instances where one will be required, but it is not common.

* Providing a better interest rate to those borrowing money. Also, these rates are fixed rather than variable.

* Not being required to provide collateral. In many instances, unsecured P2P lending can be obtained where it may not be available through traditional lending.

The advantages of peer-to-peer lending are many but this type of lending may not be for everyone. If you’ve found it difficult to obtain financing, you may want to find out more about this financing option.