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Whether you’re looking to fund your business or pay for your personal expenses, there are sure to be plenty of physical lenders and online lending platforms in your area to apply with. The only problem is that, in certain situations, it can be tough to get approved for a large loan with a good interest rate and favourable conditions. This is why peer-to-peer lending platforms have gain popularity in recent years.
Peer-to-peer lending (sometimes referred to as “person-to-person” or “social” lending) is when you borrow credit, such as a loan, from anonymous lenders and investors via an online platform. Unlike with traditional lending, where you borrow from and repay a single company, multiple lenders and investors may pool their resources, each offering to finance a percentage of your loan in exchange for a cut of the eventual profit.
So, instead of applying with your bank or credit union, where approval standards are more difficult to pass, a P2P platform can match you up with several lenders or investors in your area, any of which might be better suited to your financial needs.
For instance, peer-to-peer lending is now a popular solution for businesses that need capital to finance part of their operation, like startup costs. Although you can find a lot of traditional business lenders on a P2P platform, institutional investors also offer business loans on these websites, so that they can add variety to their stock & trade portfolios.
Individuals can get financing through a P2P platform as well. So, if you’re looking for some extra cash to cover your personal expenses, such as home repairs or high-interest debt, a peer-to-peer loan might be a good option to consider. People you know can also use P2P lending to invest in your business and earn interest on the side.
All this to say that peer-to-peer lending is becoming more and more sought after these days, especially by people and businesses who are having trouble qualifying with their financial institution for one reason or another. In fact, many financial companies now specialize in peer-to-peer lending and can offer you all kinds of financing.
Check out this p2p lending platform on Reddit.
Although every P2P lender has its own products, financing amounts and regulations, most of these platforms offer:
Keep in mind that these are just a few of the more common loan types you’ll find on a P2P platform. Your own peer-to-peer lender might offer different options and rates, this is why it’s important to compare multiple platforms before you make your final decision.
Additional Reading
Now that you have a better understanding of how peer-to-peer lending works, it’s time to learn about the advantages and disadvantages of P2P loans. Carefully consider these pros and cons, as they can significantly affect your finances:
When applying for any credit product, one of the most important things to think about is how much it will cost you while you’re still paying it off. Although a peer-to-peer loan functions almost the same as a normal loan, the final cost can vary depending on a number of factors, including but not limited to:
Luckily, applying for peer-to-peer lending isn’t too different from a regular personal or business loan. The stronger your finances are, the easier it will be to qualify for a large loan with a decent interest rate and an affordable term. Here are some of the main elements your lenders or investors might inspect when you apply:
Unless you’re an experienced borrower or investor, it can be tough to know whether peer-to-peer lending is actually the best solution for you. After all, there can be some serious risk and cost associated with the repayment process, not to mention a low rate of return if you’re lending to someone with a long loan term.
All that said, there are plenty of benefits that you can access by getting a peer-to-peer loan or funding someone else’s, namely the ability to get approved for a large amount of financing with good conditions and fewer requirements than a bank or credit union.
Before you apply for a peer-to-peer loan, get a price quote from your lending platform, so you can factor the costs into your budget. Whether you’re a borrower or an investor, it’s equally essential to think about what could happen in the future. If the costs and risks associated with peer-to-peer lending seem too daunting, it might be safer to speak with a financial advisor and find an alternative.
Interest that is earned by an individual, but not yet received. Or, interest that is owed, but not yet paid. Interest is typically earned or payable after a certain period of time, such as a month or a year, which is why it can accrue. The interest rate you pay over a full year in exchange for borrowing. An APR is expressed annually but is typically charged monthly. You can determine the total monthly interest you’ll pay on debt by multiplying the borrowed amount by the APR and then dividing by 12. Anything that has financial value is considered an asset. In order to reap the benefits of an asset, you must also own it as an individual or business. When it comes to debt, usually only real estate, jewellry, vehicles, and investments are considered assets. An individual or entity that takes something (for example money or equipment) with the intention of returning it to the original owner. When the borrower it taking out a loan, there is usually an agreement involved and applicable interest. A cash withdrawal from a credit card. Cash advances are a very expensive form of financing as the interest rate on the borrowed amount is higher and there is often a flat fee. In addition, interest becomes effective immediately after you withdraw the cash, instead of after the balance due date. An individual who shares an obligation of something that was borrowed with one or more people. All co-borrowers listed on an agreement are fully responsible for repaying the obligation. Any asset that is used to secure debt. In the event that the borrower defaults on the loan, the lender has the right to seize the asset and sell it to cover the owed amount. Collateral is also commonly referred to as security. An individual who agrees to make your loan payments and otherwise be responsible for your debt in the event that you default on the loan. Using a cosigner is a popular option for individuals who have trouble securing debt on their own. All of the costs a borrower incurs when borrowing an asset or money. Examples of borrowing costs include legal fees, interest, loan origination fees and penalties. An individual or entity that owes a sum of money to a creditor. Failure to pay the minimum payment on a loan or account on or before the agreed-upon payment date. Delinquency is typically categorized in 30, 60, 90 or 120 days since lenders typically have monthly payment cycles. Delinquent accounts may eventually turn into defaulted accounts. An individual who relies on another individual for financial support. Usually, this refers to a family member, common-law partner or spouse who is unable to financially support themselves. The market value of an asset you own less the amount still owed (including any additional fees to sell or repay debts) on the loan used to purchase the asset if any. Equity increases when you pay down the debt as well as when the value of the asset increases. Equity can be calculated at any point in time and is also referred to as lendable value or net value. A payment schedule that breaks up an owed amount of money into several equal amounts, otherwise known as installments, which are paid over an agreed period of time. An amount of money that is borrowed by one entity from another with the expectation that the amount will be paid back. Interest is typically applied on the owed amount. The ratio of what amount was borrowed to purchase an asset in relation to the market value of that asset. The formula would be: the total amount borrowed for the purchase divided by the total selling price of the asset. The borrowed amount can differ from the selling price if the individual makes a down payment, for example. In general, the lower the LTV, the more favourable the terms of the financing will be. A short term, small loan that a borrower promises to repay on their next pay day. Payday loans are known to be an expensive and risky form of financing that makes it challenging for the borrower to repay and manage. The period of time over which a borrower is obligated to make a payment. Payment periods could be weekly, bi-weekly or monthly, sometimes even longer. The prime rate advertised by a lender is typically based on the Bank of Canada’s interest rate that is set each night, which may change at any time. The total remaining balance of a loan, without considering interest and other fees. A loan that is secured by an asset known as collateral or security. In the event that the borrower defaults on the loan, the lender has the right to seize the asset securing the loan and sell it to repay the owed amount. This type of loan bears less risk for the lender, but more risk for the borrower. A loan that is not secured by an asset known as collateral or security. In the event that the borrower defaults on the loan, the lender will not have the opportunity to seize the collateral or security to repay the owed amount. This type of loan bears more risk for the lender, but less risk for the borrower. Loan Glossary
Terms
Accrued Interest Annual Percentage Rate (APR) Assets Borrower Cash Advance Co-Borrower Collateral Cosigner Cost of Borrowing Debtor Delinquency Dependent Equity Installments Loan Loan-to-Value Ratio (LTV) Payday Loans Payment Period Prime Rate Principal Balance Secured Loan Unsecured Loan
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Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
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