About Social Lending

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The internet has changed our lives in many ways, but when it comes to borrowing money, it has been a game changer. Instead of approaching a bank manager for a loan, lending websites have become an online industry, offering cash advances and loans for every situation and every budget. Banks are becoming increasingly irrelevant for savers and borrowers, both of whom seek more competitive interest rates and ease of use. It is no wonder then, that social lending is enjoying such popularity, by merging those borrowing and lending, offering better rates for both parties. Social lending is also known as peer-to-peer lending, (or P2P) because the websites are effectively a financial community.

What is Social Lending?

Very simply, those who want to save deposit their cash with a social lender, who pay the saver better rates of interest than a traditional bank. Borrowers can then apply for loans at more favourable interest rates. Peer to peer lending is carried out by intermediaries online, through social lending websites. Other distinguishing features of social lending, are that they are profit making, and that savers can typically choose who they want to lend to. However, the risk to savers is reduced by spreading the amount invested across many loans. If for example, you invested £100 with a social lender, £10 would be lent to 10 different borrowers. Generally speaking, social lending websites offer up to £15,000, but peer to peer short term loans providers will offer up to £1,000. So there is something for everyone.

How to Find a Peer to Peer Loan

Peer to peer lenders are committed to being responsible lenders, so social lending websites do make credit checks on potential borrowers to protect savers from default.  However, some will take a more personal approach and assess you on the basis of whether or not you can currently afford a loan. This will normally involve being employed. To find a peer to peer loan, simply do a search online for social lending websites, and be sure to compare rates before applying. P2P short term loans are a lot less costly than other types of short term loan, as it is a more efficient model of borrowing. As with all loans however, it’s important to make sure that you are borrowing only what you can afford, and are fully aware of the costs involved. Always check how much you will be repaying in total first.

Benefits of Social Lending

Obviously, being able to borrow at cheaper rates of interest makes borrowing from a peer to peer lender an attractive option. But they also offer other benefits. The applications process is entirely online, which makes applying easy and efficient. You are also likely to get your cash within 48 hours, because they are able to make decisions far more quickly and efficiently than banks. Typically, it’s also possible to pay off your debt before the end of the term without having to pay a penalty, so they are a far more flexible and cost effective way of borrowing.

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