When it comes to borrowing money online, you have two big options. You can either use a peer-to-peer lending platform which associates borrowers with lenders, or a commercial pending service that works very much the same as banks do.
Both of these types of services exist in the online environment, so you will never have to go to meetings or wait for months in order to see if you are eligible or not for a loan. Furthermore, regardless of which you choose, the money will be transferred to your account almost immediately after your request is approved.
This having been said, there are a couple of extremely important differences between the two services that you must keep in mind in order to avoid any unpleasant experiences. Here is what you need to know before borrowing money from either of these two:
What is a peer-to-peer lending platform?
Unlike how banks work, this main focus of these platforms is to connect individuals who need to borrow money with lenders. Some P2P lending platforms allow users to interact directly with the lenders, while others maintain anonymity and simply handle the money transfer.
The website itself only ensures that the transaction goes through smoothly and that both the borrower as well as the lender follow the terms that they agreed on. In most cases, you will be able to borrow money without having to provide too much personal data, however, certain platforms will ask you for extensive financial information if you need to lend a large amount.
What to keep in mind:
- These platforms are designed for small short-term loans;
- The terms and conditions, including the rates can vary greatly from one platform to another;
- It may take a while until your request gets approved, depending on how many active lenders there are on the platform;
- Rates are usually lower with P2P platforms, but the time restrictions are greater;
Basically, if you’re in need of a couple of hundred dollars that you do not necessarily need in under 24 hours, then a P2P lending platform is a good choice. These websites only take a small commission for themselves and the rest of the transaction is negotiated between you and the lender.
Online commercial lending platforms
Online commercial lending platforms are very similar to banks, in the sense that they are usually owned by private companies that have a fund from which they offer loans. Everything is much more centralized with these and this means that they can streamline the loan request process. In most, you should be able to get an answer in under 24 hours and once your loan is approved, the money will be instantly transferred to the bank account of your choice.
These platforms will require more information than P2P lending platforms, but you will not have to submit anything that is too sensitive. Most services require you to fill out an application form and then to photograph basic documents such as your ID, a recent utility bill, and a bank statement in order to confirm your identity, your address, and your financial information.
What to keep in mind:
- These platforms work very fast and you should get an answer in under 24 hours, along with the money;
- They have higher interest rates than P2P lending websites;
- You can borrow larger amounts of money and for longer periods of time (usually the limit is $5000 for up to 36 months);
- Most of these platforms also offer mobile apps that you can install on tablets or smartphones and streamline the loan request process;
Borrow money if you have bad credit
Both of these platforms may require you to submit your credit score, however, this information will not play any part in whether your request is approved or not. Your credit score, along with other financial information will be used for marketing purposes or to improve the services, but the loan will not be reported to any of the major credit score registries or banks.
This having been said, you may need to have a good credit score if you either want to borrow a large amount of money (usually over $1500) or if you want to repay the loan over the course of more than 6 months. Some platforms will perform credit checks while others will require that you send them extensive financial information through which to prove that you earn enough to return the money on time.
Both types of platforms come with the advantage that you do not have to pass credit checks in order to borrow money, but their services cater to different types of individuals. P2P lending platforms usually focus on giving out a larger number of loans that are limited to smaller amounts and a shorter period of time, while online commercial lending services will give you up to $5000 that you can repay over any period of time, ranging from 30 days to 3 months.