Fees and Risks to Consider in P2P (Peer-to-peer) Lending

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More and more people these days prefer a lending alternative like P2P loans instead of dealing with traditional lenders. This is mainly because P2P offers an easy online application process. Additionally, it also gives a lower interest rate especially for borrowers with a good credit rating. P2P is when an individual applies for a personal loan that is given by investors through a third party. The third party is usually an online-based platform.

Introduction to how P2P works
There are different types of P2P loans. If you are a borrower, you should know the right type for your needs. Typically, P2P lenders offer personalised rates. This means that the interest rate will depend on your personal information. There’s secured loan. In this type of loan, lenders will use an asset as a form of security; they will also offer lower interest rates. A fixed loan will allow you to lock in your interest rate for the duration of the loan.

After this, you need to understand how does P2P lending work for borrowers. If you want to apply for a personal loan, you should do it through HittaSMSLan or P2P platform. You will be required to provide information like credit history, employment, and assessed income. If the platform believes in you, they will approve and automatically pair you with one or more investors. The investors will then fund your loan.

What are the fees involved in P2P lending?
As a borrower, you have the right to know the fees involved with any P2P loan. You should expect to pay the following:

 • Upfront fees: this may include risk assurance charge (that will go to the investor) andcredit assistance fee (depending on the platform).
• Monthly fees: on top of the upfront fees, you will be charged with loan management fee, which is paid monthly.
• Extra repayments: if you decide to pay your loan in full without finishing the term, it may incur an extra fee. However, there are some that allow this without charging anything.

What are the risks involved in P2P lending?

As with anything, there are risks involved. This can help you decide which lenders to consider. Risks include:

• Interest rate: it is important that you research for competitive interest rates so youcan compare thoroughly.

• No insurance for loan payment protection: when you cannot pay off your loan (because of illness, injury or any other circumstances), the insurer will make sure that the minimum repayments are met monthly. This is called loan payment protection. Unfortunately, P2P lending does not offer this kind of insurance.

When you look closely, P2P is not very different from traditional lenders in the sense that they prioritise the borrower’s satisfaction and security. Like traditional lenders, P2P vendors will vet the applicants and scrutinise their credit history, employment, and even income to verify if they can pay. If you want to be approved, you have to take measures to increase your chances.