It’s intriguing that the reputation of unsecured debt isn’t always held in high regard. Perhaps it isn’t too surprising though, given the flurry of advertisements in recent years of lenders of dubious integrity, offering loans with sky-high APRs. Their place in the market marks a debate for another day, but suffice it to say, such outliers belie a sector which is actually as efficient, affordable, and consumer friendly as it ever has been.
Cost of borrowing will always be the biggest factor, and it is obvious to all that the record-low base rates which have endured since 2009 have driven APRs down. Yet the good value within the personal loans sector owes as much to its increasing diversity as it does to Bank of England rates. Indeed, the stagnant pool of choice dominated by banks and high-street behemoths is no more, with a multitude of online lenders from the increasingly popular realm of alternative finance beginning to make their mark. A guarantor loan is great.
The Rise of Peer-to-Peer Lending
One of the biggest players to breathe life into consumer finance is peer-to-peer lending (P2P), which, as the name implies, creates a platform for consumers to transact directly without the presence of a margin-heavy intermediary like a bank. Instead, ordinary people willing to lend their money have their funds matched directly with those seeking a personal loan.
In return, the lender benefits to the full tune of the repayments made from the borrower – typically ranging from 5 to 6 per cent – while the value from this streamlined model is also shared with the borrower, who enjoys a loan with a competitive APR. For facilitating and ensuring fair controls for this interaction, the platform will normally charge a once-off admin fee, but, other than that, the benefits are left to borrower and lender.
The key to P2P’s dynamism lies in its simplicity, with any barriers to optimum efficiency all but eliminated from the equation. This is typified by the quick and easy application process, which requires a borrower to complete only a brief online form to get started. Applicants are then screened to ensure creditworthiness. After all, such a business model would struggle to thrive if borrower default were rife. However, the necessary credit checks are typically completed within one working day, and, should you be approved, the funds can be expected overnight.
As a borrower, P2P loans typically offer a greater degree of flexibility than most others too. The amount you can borrow ranges anywhere between £1,000 and £25,000, while many also let you choose the term over which you’d like to pay it off (usually between 1 – 5 years). Some platforms like Lending Works even allow borrowers to make early settlements without incurring any charges too.
A Good Time to Be a Borrower
Peer-to-peer lending is ultimately one of the spearheads of a movement for positive change in the market for consumer credit, and is helping to shape a landscape where good-value solutions are slowly but surely beginning to replace negative stigmas. A quick visit to a price comparison site gives a demonstration of the tremendous degree of choice at a consumer’s fingertips, and instead of being seen as some sort of bailout, personal loans are now being used by consumers to make proactive financial decisions in their lives.
Whether it’s to fund home improvements, vehicles, a change in career path, a dream holiday, or to restructure finances by consolidating debt, personal loans are growing in popularity. Anyone looking to acquire one of their own should do their research, and ensure that they are comfortable with repayment plans being offered by lenders.
But the important thing to note is that the financial shackles of years gone by have been broken, and, as consumers, we are spoiled for choice. So rather than being shy to explore the many options which are out there, instead be vigilant and determined in your quest to find the best possible deal you can. The time is now.