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What Is Peer to Peer Lending?

In recent years, a new area in the world of lending has begun to gain extra popularity. This area is known as social or peer to peer lending. Peer to peer lending works on an idea that people who want to borrow money should be placed in touch with people who are willing to lend that money.

In simple terms, it’s like sharing money between people across a vast network, but if you borrow money you will need to obviously pay it back. If you want to borrow money, your peer to peer lender will put you into contact with the people who will lend to you. Because of this, the companies behind these services are often intermediaries between lenders and borrowers. Most of the time, they can offer lower rates of interest than a traditional loan. However whether this is the case for you will depend on a range of factors, including your credit score.

Remember, if you apply for a loan with peer to peer lending, you will need to have your credit checked using a credit reference agency, and you will also need to pass the credit tests imposed by the peer to peer company.

The Positives and Negatives of Peer to Peer Lending

If you’re looking to get your hands on some extra money without having to pay huge amounts of interest, then peer to peer loans can be far cheaper and more agreeable than the solutions conventionally offered by building societies and banks – particularly if you have a good credit rating. Some Peer to Peer websites come with no minimum loan amount, which may be perfect for those who only want access to a small amount of credit, and they represent a fantastic option for people who struggle to get loans from standard building societies or banks. Most lending sites will also allow you to repay the money that you borrow early without having to pay any kind of fee or penalty.

Of course, as with any financial service, it’s important to remember that peer to peer loans might not be the right option for everyone. For example, the interest rates associated with peer to peer loans are sometimes higher than that of traditional building societies and banks if you have a particularly poor credit rating. At the same time, you may be required to pay a fee to the lending company themselves for them agreeing to arrange the loan on your behalf. This may even happen if the loan is not fully funded, which may lead to multiple fees being paid more than once. What’s more, if you have poor credit you may still find that you struggle to get the money that you need.

How to Apply for a Peer to Peer Loan

In order to apply for a peer to peer loan, you will need to go to one of the available lending sites online today and register. From there, you should be able to select the amount that you want to borrow and how long you want to borrow it for. After that, you should be able to see if you qualify for a loan and what kind of interest rate you will need to pay. It’s worth noting that many peer to peer lenders will parcel up loans between a range of different people. Depending on your credit rating you might be offered less than what you wanted to borrow, or you may be offered a certain amount at one interest rate, and another amount at a different interest rate.

The amount that you can expect to pay on your peer to peer loan will depend significantly on how much of a risk you are considered to be. For instance, if you have a very good credit score, then you may be able to borrow the money that you need at an interest rate of around 7%. However, in some cases, the amount you can borrow will be affected by a variable interest rate, which means that you pay more or less each month.

If you have a very bad credit rating then your interest rate could be as high as 30%. It’s crucial therefore to shop around and make sure that you’re getting the best financial assistance for your available circumstances.

Remember, when you take out a peer to peer loan, if you default on your repayments, the company responsible for setting up the loan may choose to pass your amount owed onto a debt collection agency who will chase you for repayments on the behalf of the people who lent to you. Missing payments or defaulting on even a peer to peer loan will have an impact on your credit rating. Once an agreement for credit is in place, your peer to peer website will register an entry into your credit report in the same manner as any other loan.

What Should You Do If You’re Refused a Loan?

If you apply for a loan and you are unsuccessful, or you find that you’re struggling to get credit from traditional lenders, then it’s important to note that there are still things you can do to access the finances that you need.

Crucially, it’s also worth noting that there are some things you will need do avoid that could potentially make it more difficult for you to access the credit that you want in the future. Following, we will look at what it means if you are refused a loan or credit, and what you can do in terms of alternative borrowing options.

Being Refused a Loan or Credit

When you are refused credit or a loan by a lender, the company that you attempted to get finance from should give you an explanation of why you were not given the loan. In most cases the problem will be down to bad credit or a bad credit history. If you are turned down because of your credit, your lender should tell you which of the credit agencies available they used to find the information that they got about you.

In some cases you will be able to ask why you didn’t get the loan, but remember that the lender will not have to offer much of a detailed answer. However, remember that mistakes can happen with credit reports, and if you spot a mistake you will need to write to the credit agency and ask them to correct it as quickly as possible. Keep in mind that you will need to offer an explanation as to why something is wrong, and include all the evidence you might have.

When you inform a credit checking agency about a mistake that they have made on your account, that agency will be given a total of 28 days to act and rectify the problem. During that time the detail that is wrong within your file will be marked as disputed while it is further investigated.

Don’t Just Continue to Apply

One very important thing to remember when you are applying for credit and you have been refused, is that you should never continue applying for more credit and constantly continue to get refused. The more you attempt to apply for credit, the more those attempts will show up on your credit file, regardless of whether you are successful in getting the financial assistance that you have asked for or not.

Several applications for credit in a small amount of time will show lenders that you are desperate for cash, and in some scenarios, you might find that your credit rating is damaged even further. This could also have an impact on the interest rate that you are charged at a later stage when you are successful in applying for credit.

If you are turned down for a credit card or loan, then this might be the perfect opportunity to start thinking more carefully about your current financial situation. If you already have debts in place that you cannot fully repay, then you may need to speak to a professional about budgeting options. There are various organisations across the UK that offer confidential and free budgeting advice.
What to Do Next

What you should do next when you are refused credit will depend largely on why you are applying for money in the first place. For example, if you are looking to borrow money because you want to pay off other debts, or because you need help in paying for your current bills and living expenses at the end of the month, then you should consider taking to a free debt advisor as quickly as possible. These professionals will help you to come up with a strategy that should help to prevent you from getting deeper into debt.

If you are looking to fund purchases for items that you need and you know that you can afford the repayments that will be expected, then you will need to look at your credit rating. You can do this by checking your credit report. You can see your report by subscribing to a service or buying a single report.

Considering Credit Unions

If you have particularly bad credit, or you are struggling to get low interest rates elsewhere, then you might be able to borrow from a credit union. Credit unions are a form of non-profit organization that has been set up to assist people within a specific community. There is a cap in place on the amount of interest that a credit union can charge on their loans, and there are no hidden penalties or charges to worry about either.

Of course, in most circumstances you will need to be a member of the credit union in question to get access to loans, and some will require you to have some savings with them.

What You Should Know about Taking Out a Joint Loan

There are many different considerations to think about when you are taking out a loan. Those considerations become a little bit more specialised in circumstances where you might be thinking about taking out a joint loan.

Joint loans are quite common across the UK, and indeed throughout many different countries. Various couples take out forms of joint loans or debts to help them make progress in their life goals. However, although a joint loan can have many benefits, such as ensuring that you should be able to borrow more between you then you would be able to borrow when taking out the loan on your own, it does require careful forethought. After all, when you take out a loan with another person, each of you could be asked to repay the full amount owed if the other person defaults on their payments.

The loans and debts that can be taken out through a joint process may include secured loans such as a mortgage, unsecured personal loans and joint bank accounts that include an overdraft facility.

Several Liability and Joint Liability

You may assume that when you take out a debt or joint loan with someone else, then you will only be responsible for half of the amount owed, or what you consider to be your share. However, the truth is that this is actually not the case. When you sign a contract or credit agreement for an overdraft or loan, or agree to make payments with someone else, then you also agree to pay off the entire debt if the other person will not, or cannot.

Unfortunately, it doesn’t matter who spends the money that you borrowed, or who you believe now owns the items or item that you bought using your overdraft or joint loan, and it doesn’t make a difference whether you are married or in no kind of relationship at all. For instance, if your wife or partner dies then you will still need to make payments on a joint mortgage. Similarly, if you end the relationship with your other half they might end up running up debt on your account with an overdraft facility and you would be left to pay for everything. In other words, whenever you take on a joint debt you are also taking on joint liability and responsibility. If the other person does not make the payments that are required of them, then you could end up with a great deal of debt to manage.

Can You Get a Joint Credit Card?

It’s important to remember that joint loans and debts aren’t necessarily restricted to big things like mortgages. However, in the United Kingdom, you currently will not be able to take out a credit card as a joint account, even if you and your partner both have credit cards. There will always need to be a single person who signs the agreement for the card and is responsible for paying the debt in full.

Though it is possible for the main cardholder with a credit company to let someone else use the credit card on their account, this secondary card holder will not have any responsibility legally to make payments to that card company.

Can Joint Applications Improve Your Chances of Getting Credit?

Applying for a joint loan can sometimes have a negative impact on your chances of getting credit overall. However, you may need to avoid applying together if one of you has a bad credit rating. Once you have taken on a joint loan or debt with another person hen your credit file is connected to theirs. This could mean that if you want to apply for a loan in your own name, the lender will be able to see the other person’s credit history and take that amount into account alongside your own.

Because of the obvious complications that can come to linking your credit history to someone who has bad or poor credit, it’s important to think carefully about how any connection with your partner from a financial perspective may affect your future chances of getting credit or loans in your own name. You might find that it’s best to look into your credit ratings before you think about taking out a joint loan.

In some cases you can end up getting better interest rates and deals on things like mortgages if you simply choose to apply for the credit through your own name, or the name of the partner with the best credit history. Speak to a financial advisor if you need help on figuring out what the best credit solution might be for yourself and your partner. These professionals are often equipped with the skills required to give you an insight into your position within the lending and borrowing market.