From a very young age, we are all taught to manage our money right. We are told that we need to save for a rainy day before we spend, and all those years of putting money into the piggy bank did rub off on most of us. However, despite all the savings, there might be times when we need money, which could be for numerous reasons. But you might find it difficult to approach a bank or a private lender for a loan for numerous reasons and this is where a no guarantor loan comparison site like Now Loan could help.
This could also be the paperwork or the fact that a bank might not offer a loan for the purpose you are trying to borrow. So, what could you do at times like that? Is there an alternative way to get money besides ending up with a shady lender who might make you pay through your nose while you are repaying? Well, don’t worry, there is a solution, and we have it right here.
The New Age Lending
Peer-to-peer lending or P2P is a lending mechanism that is growing popular in the online world. And just as in the case of regular loans, P2P loans are available as both secured and unsecured loans based on the lender’s discretion. However, in most cases, the lenders choose to offer unsecured loans like most people looking for P2P loans are those who do not have strong collaterals to tie to their loans.
How Does It Work?
As mentioned earlier, P2P lending is when individuals lend money to other individuals and businesses in need without establishing themselves as a financial institution. Well, this is technically not a very new age phenomenon because we have all been borrowing money from our friends, family, and relatives at times of emergencies and have returned it. But the fact that all this happens online is what sets it apart. These platforms are designed to match individual borrowers with individual lenders.
It is growing popular worldwide as an alternative financing option when loans come from individuals instead of institutions. As most P2P lending takes place online, the users need to log in to a portal in their region, update their money needs, and wait for the lenders. In the meantime, the platform would scrutinize the application, evaluate the credit risk and the interest rate before suggesting it to potential lenders. The applicant or the borrower gets a list of lenders or investors with varying interest rates that he can choose from. The borrower has to repay the interest monthly to the lender besides paying the principal amount after the agreed maturity date.
The Pros and Cons
It has a low-interest rate compared to a private lender. It is easily accessible through the lending platforms, and the lender gets better returns on their investment (lending) than any other type of investment.
The borrowers are generally individuals with high credit risk, which means the lender’s chances of not getting back their money are high. As there are no collaterals or institutions involved, it is impossible to insure or get government backing for loan recovery or loss. Some jurisdictions do not consider P2P lending as a legal transaction. So, not everyone could access it.
So, if you are looking for a short-term unsecured loan from a non-financial institution, a P2P loan could be your best bet. However, make sure to evaluate your lender’s terms and conditions before you sign up for one!