How to borrow without using bank products

The financial crisis has brought down the trust people have in banks and banking products. So, what is the way forward? Is it Peer to Peer lending?

07:21 24 September 2013

If you have had bad experiences with banks in the past, you may no longer have trust in them and avoid further business with them. You are certainly not the only one in this position, and this is the reason that peer to peer lending has increased in the recent past.

Peer to peer lending is the alternative to bank loans – it means that a person can take on a loan from another person, without any financial institution playing any role in the transaction. This can be done without difficulty by means of some specialised websites out there on the Internet that connect people for peer to peer lending.

Here are some of the advantages and disadvantages of peer to peer lending:

• in case you have trouble getting finances from banks, peer to peer lending may be the only alternative for you;

 

• you still need a good credit rating to apply for this type of loan, but it is significantly less rigid than a bank or financial company;

 

• peer to peer websites or companies require that you pay a fee for any loan you take via them, so you have to take that into account as well;

 

• with peer to peer lending there is no minimum loan, so it is a great solution if you only need little money to take you through the month;

 

• peer to peer lending companies use the same or similar methods that banks use to get their repayments from you in case you miss on your monthly payments, so be sure that that's not the case;

 

• Missing on your loan payments will also mean that your credit rating will decrease.

Banks no longer have the monopoly on the lending market, but that doesn't necessarily mean that peer to peer loans are always better. You still have to search the market for a better product before applying for your loan, if you are still not sold on peer to peer lending.