P2P Lending – Peer to Peer Lending Ins and Outs
Should you use it to pay off your credit card debt?
If you are drowning in credit card debt, high interest payments only add to your pain. One option to look at when making a plan to pay off your debt is peer to peer lending. Sites like Prosper and Lending Club allow ordinary people to join in groups to make loans to those who need them. Many of the borrowers use the loans to consolidate high interest credit card debt.
But, when looking into P2P, you need to consider whether you will save on interest in the end. If you have a low FICO score, it will drive up your projected interest rate. Looking for a loan that is above the amount that the sites consider optimum for you can also result in a higher rate. The loans also include a closing fee that could drive the cost higher than is worthwhile. When borrowing through person to person, it’s important to remember that this is still a debt you are required to pay. Defaulting on the loan will have the same negative effect as defaulting anywhere else. But, if you are able to secure a loan with a lower rate than you are paying on your cards, it could be worthwhile. Another perk is that, once you consolidate, you have one payment to make instead of four or five.