These five reasons to use debt as a financial tool may just mean you need a peer loan now
I love being a part of a financial bloggers group called FinCon but I’ve gotta say, sometimes I feel like a black sheep.
Why? Because almost everyone else in the group is all about paying off debt and living debt free. It’s like debt is the root of all evil and their sole mission is to talk people out of credit.
But I’m going to show you why debt can be one of the most powerful financial tools. In fact, I’ve got # reasons why you need a peer loan now!
It’s not so much you need a peer loan but that is really one of the only types of loans available since the financial crisis. Banks are cutting back on refinance loans and personal loans, small business loans have all but dried up and credit cards are usually the cause of debt problems rather than the solution.
But a peer loan can actually help you build a better credit score, buy assets and start something bigger than you could otherwise accomplish.
The 5 Reasons to Get a Peer Loan Now
I’ve used peer loans four times to pay off debt, improve my credit and to do a number of other things. Many people look at debt and p2p loans as solely for one purpose. That narrow-sighted perspective misses a lot of the uses of this financial tool.
1) Peer loans help to pay off bad debt. As much as I like debt as a financial tool, credit cards are the worst. Credit card companies set your payment low so you don’t notice how much you’re paying. It can take years to pay off just a few thousand dollars and you’ll pay double- or triple the amount in interest.
Peer loans have a fixed payment and a fixed payoff so you know exactly how much in interest you’re paying over the loan. Since payments are equal every month, you always know how much to budget and won’t get stuck with nasty surprises.
2) Peer loans help to build your credit score. This is one most people don’t know about but I’ve used peer lending to help add as much as 140 points to my FICO score.
Personal loans go on your credit report as non-revolving debt, meaning it has a fixed payoff date. That’s different from credit cards that get reported as revolving debt because you can just charge more and never pay them off.
Up to 10% of your credit score is the type of credit you have, this revolving versus non-revolving debt. Less non-revolving versus revolving debt looks better because of the fixed payments and payoff date.
Not only that but paying off your credit cards with a debt consolidation peer loan will improve your credit utilization rate as well. That’s the amount of debt you have versus how much is available and another big factor in your credit score.
3) Peer loans can save you thousands on interest payments. Lending Club borrowers report reducing their rates by an average of 32% with a peer loan versus high-interest credit cards.
That means a difference of $5,600 in interest on a five-year, $5,000 peer loan versus credit cards or other high-interest loans. It also means your monthly payment could be as little as half of what you were paying before.
4) Peer loans can help you keep from missing payments. A survey by the Federal Trade Commission found that up to 20% of late payments were simply because someone forgot to make the payment.
Most bills come with a hefty fine for missing a payment and credit card rates can double. That’s nothing compared to the damage to your credit score and what it will mean for interest rates on future loans.
Debt consolidation is the most popular use of peer loans because it works. You can borrow up to $35,000 on most peer lending sites to pay off all your credit cards, store cards and all those miscellaneous bills. Making one monthly payment is a lot easier than trying to remember dozens.
5) Peer loans are there when you need them. Bank lending has fallen off a cliff since the 2008 crisis and increased regulations mean it may never recover. Peer lending has stepped up to fill the gap and it’s never been easier to get a loan.
That may not be a reason to get a loan but it’s sure nice to know you can get the money if you need it. Most of the p2p lending sites lower their credit requirements for repeat borrowers, making it even easier to get loans after you’ve paid one off.
How to Get a Peer Loan Fast
So now that we’ve set it up why you need a peer loan now, I’m not going to just leave you hanging. I’ve posted a few articles on the site about how to get a peer loan and how to use debt consolidation to get back on track but I’ll go through the major steps here.
Getting a peer loan is actually easier than you might think and usually takes less than 10 minutes. Try getting a traditional bank loan and it will take you longer than that to get to the bank, let alone the time it takes to plead with the loan officer and get rejected.
Getting a peer loan is quite a bit easier. In fact, there are pretty much just 4 steps to get a peer loan.
- Click to check your rate on PersonalLoans by putting in how much you want to borrow and your approximate credit score. It’s a ‘soft inquiry’ so it won’t affect your score.
- If you agree to the interest rate, fill out some basic information like employment, income and link your bank account to receive your loan.
- About one in three borrowers are asked to verify identity or income by emailing a copy of ID, W2 or tax forms.
- Most peer loans can be in your bank account within five business days or less.
It seems like getting a peer loan should be more complicated than that but it’s really not. The peer lending site will verify your information and check your credit report but all this happens quickly. The only thing that can delay the application process is if they ask for a copy of something and you take a while to get it emailed.
I’ve used PersonalLoans and the fact they use their network of lenders to get you a p2p loan. You can also check out our list of best peer to peer lending sites for other options.
Don’t avoid debt just because everyone else says it’s bad or that you can’t handle it. Use a peer loan as a financial tool to boost your credit score, pay off high-interest debt and accomplish any number of financial goals. There’s nothing wrong with needing a peer loan. In fact, it might be one of the best financial decisions you make.