Has anyone ever used a peer-to-peer lending site? Isn't this very similar to loan sharking?

Question

Has anyone ever used a peer-to-peer lending site? Isn't this very similar to loan sharking?

Answer 1

If you are new to the world of loans, then all the jargon and terminology can seem very confusing. There are so many different terms to understand, and unless you know some of them you will not find the best loan deal to suit your needs. If you want to know more, then here is a guide to some of the basic loan terms you might need to know.When you borrow money in the form of a loan, the money you receive is called an advance. The more money you want to borrow, then the bigger your loan advance. It is called an advance because you are getting the money in advance of paying for it.The APR, or Annual Percentage Rate, is the amount of interest you are charged on your loan amount. This amount is written as a percentage, and refers to the total you are charged each year. APR is one of the primary features for comparison between loans, as it is a standard measurement for all loans.

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The lower the APR, then the cheaper the loan interest will be. Credit scoring is a method that lenders use to determine your eligibility for a loan. They ask a series of questions about your earnings and financial situation. Each answer you give is scored, and the better your score then the more likely you are to be accepted for a loan. If you score badly then you might be declined for the loan you want.The loan term is the agreed time over which you will repay the loan. You will repay the loan monthly over this period until the loan and interest is fully paid back. Loan terms on personal loans usually range from about 1 to 10 years, with mortgage loan terms being longer at around 15 to 25 years. The longer the loan term, the less your monthly payments will be, but the more you will have to pay back in interest over the years.

Answer 2

If you're talking about sites like Prosper, no, it's not similar to loan sharking. You get a loan based on lenders' evaluation of you--specifically your credit score, the purpose of the loan, and your "pitch" or explanation for needing the loan.

Interest rates of 12%, 15%, or 18% are nowhere near loansharking. (That's like 20% a week.) Those interest rates are less than most credit card rates.

Answer 3

I have been a lender on Prosper for a little over a year and it is not like loan sharking at all. It really is definitely more like going to the bank and asking for a loan. On Prosper, every loan is amortized as a 3 year loan ranging in interest rate depending on credit scores. On the opposite side, which I am familiar with, the lending is very risky and a lot of lenders are losing a lot of money. I personally have stuck with middle of the road credit scores and have netted an average of 15% with no defaults (so far).