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4 Reasons Why P2P Lending Is Better For Students Seeking Loans

P2P refers to Peer-to-Peer lending. Peer-to-Peer lending is basically a platform where people with money come together to lend to those that are looking to borrow money, including students. Lenders charge interest for the money they lend out. So how is it any different from a traditional bank or financial institution? A bank acts like a middle man, taking money from investors and lending it out to borrowers. In P2P lending there is no middle man, just a platform where people gather. In short lenders are directly lending to the borrower. And with the elimination of a middle man, costs go down benefiting both sides.

So how did P2P emerge? After the 2008 financial meltdown there was a liquidity crisis. Banks had become very prudent and many people who had non-traditional incomes had become sidelined.

Learn Where To Find Student Loans Quicker & Easier

Learn Where To Find Student Loans Quicker & Easier

At the same time depositors were getting extremely low returns. Enter Zopa. Zopa was the first P2P lending platform in the UK. When they started, at first they were giving only personal loans. It became a huge success. It was giving better returns than the banks and even was lending out at the same or lower rates than banks. Also many people denied loans by the banks got them through Zopa.

What started from Zopa has now mushroomed into a booming industry. There are many peer-to-peer lenders. It is a highly competitive industry, which means a lot of choice for borrowers.

So why should a student venture towards peer-to-peer lending for student loans? There are many reasons why P2P may turn out to be a better bet. We shall discuss four of them.

1. You might get better school loan rates through P2P lenders

P2P lenders are less prudent but in no way less smart. P2P has not made the same mistake as banks by being overly prudent. They, using their own algorithms, have their own understanding of risk. So students who are considered very high risk borrowers by banks and given high rates, will get much more favorable rates through P2P platforms. Also as mentioned above that P2P platforms have surged in number and are very easy to use since they are online. So students can get a lot of quotes in an hour, and find a very good bargain if they put a whole day in.

P2P is also more likely to give better rates, because unlike banks, they do not have a branch network to maintain. That combined with very low fees for facilitating a “meet-up” of lenders and borrowers on one platform translates to very low cost - allowing them to be very competitive in their pricing. This combined with effective savings while at college can translate to a huge sum saved over four years.

2. Peer-to-Peer Lenders offer a Faster Application Process

Zopa brought one more thing which was a revolution in the world of lending; a very simplified process for applying for a loan. And not only was the process simplified, requests were dealt with in record times. Now there are platforms which get back within the same day with a yes or a no.

This is especially important for students as a lot hinges on the finances they can arrange. Also once your application is approved you get immediate access to funds.

3. Greater Convenience

Often when banks pull up your credit reports it appears on your credit history. The problem arises when the bank rejects your loan application. The next person you go to can find out that the last bank checked your credit report and guess that they most probably rejected your loan application.

Most P2P platforms tell you upfront that their checks won’t show up on your credit report, thus allowing you to explore more avenues with greater ease.

 4. Simple fee structure

P2P platforms pride themselves on their transparency. There are no hidden charges. You will be told upfront how much interest you will have to pay in the case your loan application is successful. If you'd like to apply for a loan, you can do so online with Lending Club or Prosper Loans in minutes.

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