Getting a loan while face tough times and need quick cash, is easier said than done, especially if you have bad credit. Most banks and financial institutions will take one look at your credit score and reject your loan application as they need good credit rating.
What is good and bad credit?
- Good credit is a score between 690 and 719, and above.
- Scores between 630 and 689 is fair credit.
- Any score from 300 to 629 is bad credit.
Your credit history depends on three factors, namely: the amount of money you currently owe, your current credit, and the timeliness with which you have been paying past debts. Banks don’t want to give money to people with bad credit as there is a chance of not getting all the money back.
Benefits of Peer-to-Peer (P2P) Loans
These loans enable individuals to borrow and lend money without any financial institution as an intermediary, and extend credit to borrowers who are unable to get it through traditional financial institutions.
Bad credit won’t be a problem
Since you deal directly with a lender, the requirements of securing such loans are minimal and easy to fulfill. Even if your credit rating is bad, you can still convince them to give you the loan, as the approach is more personalized. P2P loans are provided by people who understand your predicament, and more inclined to putting faith in you.
Lower interest rates
Interest rates for bank loans and other unsecured loans (example: payday loans) are usually much higher as compared to P2P loans.
No pre-payment penalty required
As mentioned, lenders trust you to return their money, so they don’t charge extra if you repay earlier than your scheduled repayment. While this can already be considered as a loss to the lenders, they will void the pre-payment penalty in such cases.
Get fast and easy cash
Since all transactions are conducted online, the processing of your application is usually quicker. Bank loans mean a ton of paperwork that is often transferred to different departments for signatures and verification purposes. A tiny discrepancy means you will need to fill out fresh paperwork or re-apply for the loan. P2P loan requests are often facilitated in 7 to 10 days, depending upon how soon you can provide necessary information and fulfill requirements.
P2P is an excellent solution for bad credit, but it is still advisable to continue improving credit ratings to make the financial road smoother in future.