We’ve talked previously about peer-to-peer loans and reviewed Lending Club (one of the most popular peer-to-peer lenders) in detail, but today we wanted to take a look at the best options for someone who wants to take out a peer-to-peer loan (for debt consolidation).
There are only a limited number of reputable debt consolidation companies, which is why you want to be sure to choose carefully. If you want to learn about the different types of consolidation loans, read our post about debt consolidation programs, and check out our post about the fees and costs for even more information.
In this post, we’ll look at some of the reputable peer-to-peer consolidation lenders and help you decide which one (if any) may be right for you.
What is a Peer-to-Peer Loan?
A peer-to-peer loan refers to a loan that is between two individuals, rather than between a bank or large financial institution and an individual. In general, peer-to-peer loans are issued through a company that matches the individual investors with the individual borrowers. Even though these loans take place in a non-traditional way, interest is still charged and occasional defaults still happen. This type of lending offers the opportunity for people who need a debt consolidation loan as part of their debt payoff plan a way to apply for a loan without using a bank, and in some cases it can provide an opportunity for a lower interest rate.
Best Peer-to-Peer Lenders
Started in 2007, Lending Club is now responsible for over $5 billion (yes, that’s billion with a “b”) loans across the United States. This makes it the largest peer-to-peer loan lender in the market. You can get a rate quote without dinging your credit score (what’s known as a “soft credit pull”), and if they accept you, you’re given several different options with varying loan terms.
Loans can be had for up to $35,000 and interest rates offered are between 7.71% and 24.63% depending on a number of factors, such as your credit score, credit history, income, etc. So if you are diligent with your payments and your credit history/score shows this, you are rewarded with a better loan rate. The lowest FICO credit score accepted is 660. Loans are also unsecured, meaning you do not need to put up collateral to be loaned money.
As of 2008, the Better Business Bureau (BBB) has given Lending Club an A+ rating.
Get offers for lower-interest rate debt consolidation loans here on ReadyForZero!Check your rate using ReadyForZero's free debt consolidation tool. People have saved thousands by consolidating higher-interest debts using a single, personal loan, this will not negatively impact your credit. Check Your Rate Now
Started in 2006 (the first peer-to-peer lender in the US), Prosper is now responsible for over $1.6 billion of loans issued in America. If you have a lower credit score, it may be easier to get a loan with Prosper than it is with Lending Club, and their lowest credit score threshold is a bit lower than for Lending Club (see below), so if you have a lower credit score you might want to start with this one.
Loans can be had for up to $35,000 and interest rates offered are between 6.05% and 30.09%, again depending on you — your credit score, credit history, amount of loan you’re asking for, etc. The lowest FICO credit score accepted is 640. Loans are also unsecured, meaning you do not need to put up collateral to be loaned money.
As of April 2014, the Better Business Bureau (BBB) has given Prosper an A+ rating.
Kiva – Something different
If you’re interested in lending (rather than borrowing) a small amount of money with a peer-to-peer lender, consider Kiva. Kiva is a non-profit organization with a mission to alleviate poverty through lending. While you cannot apply for a debt consolidation loan through this site, it’s important to include it in any list of the best peer-to-peer lending platforms.
For as little as $25, you can start to lend money to others in need in over 79 countries. 100% of everything you lend goes towards funding individuals. Also, lenders earn no interest, making this a charitable contribution to others as people are lending their money for free. Repayment rate is currently at 98.8%, and the average loan size is $418.13.
These represent the three best peer-to-peer lenders on the market. If you think debt consolidation through a peer-to-peer lender could help you, look at these and decide if one of them is right for you. Our Debt Consolidation Resource Center can also offer more details.
Do you have any plans to use one or do you have experience of using one in the past? Please share in the comments below.
Image Credit: Viktor Hanacek