What is peer-to-peer lending and how does it work?

Hi, I’m Elizabeth from finder.com.au. If you’re considering taking out a personal loan, you
may want to consider a peer-to-peer loan. These lenders can offer rates up to half that
as low as bank unsecured personal loans because they’re tailored to you. So let’s see how they work. When you apply with a peer-to-peer lender
you’ll be approved or denied just like when you apply with a bank but if you are approved,
the peer-to-peer lender won’t be the ones lending you the money. Instead they’ll match you to an investor or
a group of investors. The investor or group of investors agree to
provide funds to these borrowers and in exchange earn interest. So let’s talk about interest. Peer-to-peer lenders can offer very competitive
interest rates because they use something called risk-based pricing. This basically means that if you have a very
high credit score or a good borrowing history you can be rewarded with a lower rate. If you have a lower credit score or a shaky
borrowing history you will receive a higher rate or you may not be approved. While you won’t receive your final interest
rate until you apply with a peer-to-peer lender you can receive a rate estimate without it
affecting your credit score. For more information about peer-to-peer loans
and to compare them head to finder.com.au.

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