How to Get Peer-to-Peer Online Loans with Bad Credit

Peer to peer loans are a new type of online loans to get you money you need even on bad credit

I was working as a labor economist for the State of Iowa during the Great Recession. I saw first-hand how bad the recession was for people across the country, the double-digit unemployment and how banks shut everyone off from getting loans.

A decade later and the economy has rebounded but a lot of people are still shut out of the financial system. Credit scores have increased but banks still aren’t lending to a lot of people.

Peer lending, or p2p, has been around since before the financial crash but it’s become a critical piece of the loan market since. In this article, I’ll start by showing you how the peer to peer loan system works and then how to get the money you need even with bad credit. I’ll also reveal the p2p sites I’ve used and compare online lenders.

What is Peer to Peer Lending?

Peer to peer (p2p) lending is simply a website for individuals to request a loan from funding sources outside of banks. Lenders and p2p investors are made up of everyday people throughout the United States who are willing to assume a portion of the loan.

For example, say “John” wants to borrow $10,000 dollars. He fills out an application on a peer-to-peer site like Prosper. The application is seen by thousands of p2p investors, regular people that want to invest in this new type of lending.

Money is pooled from various individuals, each assuming a percentage of the loan. Say 20 people each agree to loan $500 at an interest rate of 14%, then Prosper combines the money and issues the loan. Individuals are then paid both interest and principal monthly based on interest rate and their percentage of the loan.