P2P: Affordable loans for the people, from the people

December 31, 2015


It’s sometimes forgotten that among the sharks, doorstep and payday lenders are a host of other credit providers who offer good-value, efficient solutions to those in need of a loan. Let’s not forget, we are still in the midst of a period in which base rates are extraordinarily low, and it should thus naturally form the basis for good conditions as a borrower.

However, it could also be argued that increased competition, rather than Bank of England rates, has been the biggest catalyst of all for a more favourable borrowing landscape. For too long banks ruled the roost, making you queue up to sign a load of paperwork, only to inevitably rip you off. However, those days are long gone with the advent of the online age, and, as a by-product, the arrival of alternative finance.

In particular, peer-to-peer lenders in the UK have made their presence felt in the market for low interest loans. The business model for these types of online platforms is still relatively new, yet the key to their success lies in their efficiency and simplicity. As an entity, they act purely as a facilitator for the matching of funds from consumers willing to lend their money directly with those seeking a personal loan.

Efficiency and good value in P2P

There is no capital siphoned out of the “transaction” along the way, nor is there a presence of any intermediary. Pounds are lent one-to-one, with the platform only taking a small fee for facilitating, and for ensuring that proper controls are executed (such as credit checks). As a lender, you benefit from a return usually in excess of 5% per annum as a result of monthly repayments from borrowers, who themselves can expect an APR on their loan starting from around 6%.

That is, of course, provided your credit score is sufficient to meet their minimum. Because platforms are lending consumer money, they tend to screen applicants more thoroughly than most lenders. However, it is well worth giving it a try, given that it takes only a couple of minutes to apply. And, if approved, turnaround time for a decision is a solitary working day, with the funds to follow within 24 hours thereafter if approved.

You’ll also enjoy a good degree of flexibility, with scope for choice in both the amount you wish to borrow (£1,000 to £25,000) and the term over which to pay it off (1 to 5 years). Some platforms such as Lending Works even permit you to make overpayments and early settlements without penalty.

All in all, peer-to-peer lenders provide some long overdue and healthy competition to the loans sector, which invariably has forced others to improve their standards in terms of both value and convenience. It may be that on a given day when you peruse price comparison sites, you find even better deals from a different form of provider.

But that almost underlines the very crux of the matter. Whether you’re looking to get a loan for a wedding, home improvement, a car, or even to consolidate existing debt, there are a myriad of good options out there. With a little bit of research, and not too much effort, you can easily find the best possible one for you.