Are P2P sites the answer to those needing extra money before Christmas? Mike Todt argues why the alternative finance sector can help young borrowers, and what they need to look out for when taking out a loan…
With Halloween behind us, the countdown to Christmas has well and truly begun. For the next six weeks or so, much of our lives will centre on John Lewis adverts, lights, extensive decorations, Christmas jumpers, gift shopping and roast dinners.
Yet with all the fervour and excitement comes an inconvenient and inevitable obstacle: expense. It’s the very reason January can be a dark month for so many of us – well, in addition to the weather that is! But the festive season and beyond need not be one of financial dread, and instead one of prosperity and great memories. And if you need a sensible helping hand to make this happen, don’t be scared to use it.
After all, there are plenty of low-cost loans out there which can prop you up when you need it, without placing any undue stress on yourself in the long run. Indeed, the personal finance sector is as agile and diverse as it ever has been, and the world of alternative finance has brought some long overdue competition to the credit industry – which has long been ruled with an iron fist by the banks.
The rise of P2P lending
Chief among these alternative lenders are peer-to-peer (P2P) platforms, which facilitate the direct matching of funds lent by consumers directly with those seeking a loan using an online model. As a result, the typical, profit-heavy intermediary such as a bank is eliminated from the equation. This in turn generates value for both the lender and borrower; the former benefiting from a good return on their money, and the latter a competitive APR on their loan.
For a borrower, the benefits tend to extend beyond good value too. The simple online process means a personalised loan quote is attained within two minutes, and subsequent applications – underwritten by a team of credit experts – are returned with a decision within a working day. If approved, the funds can then be expected overnight, meaning you’ll likely be good to go within 48 hours of applying.
Most platforms allow you to borrow an amount ranging from £1,000 to £25,000, with the flexibility to choose the period over which you’d like to pay it back (typically 1 – 5 years). One of the hallmarks of peer-to-peer lending is its transparency too, with no sneaky charges associated with the loans they distribute, other than a once-off admin fee. Some, such as Lending Works, even take this a step further by allowing a borrower to make overpayments and early settlements without incurring any fees at all.
Make sure to do your research
So whether you want to consolidate your debts, finance a new family car, escape the cold with a holiday, or simply get your hands on a few extra pounds to make it a Christmas and New Year to remember, the best low-cost loan for you may be just a couple of clicks away.
The key, of course, is to take care of business on your end, and do your homework. A peer-to-peer lender might well be the best bet for you, or there might be even better offers and providers out there. Just be sure to shop around, and, when doing so, to consider the following:
- How much do I need to borrow?
- What are the repayment terms being offered?
- What is a fair APR, given my credit history?
- How flexible are these different loan providers, and can I tailor it to suit me?
- How much administrative work do I need to put in during the application process?
The bottom line is that the stigma surrounding unsecured loans has long dissipated, and, if used sensibly, these are now a means of making constructive financial decisions which can enhance your quality of life. After all, Christmas is a joyous time to celebrate with family and friends, not a time to sweat about making ends meet!
NOTE: This post is supported by Lendingworks. The views presented are solely those of the author/company and do not necessarily represent the views of Y Money Y. The information provided does not constitute financial advice and anyone thinking of taking out a loan should also read the information provided by the Money Advice Service or contact their local Citizens Advice Bureau. Tell us what YOU think: tweet @ionayoungmoney or leave a comment…