In 2017, peer-to-peer lenders are expected to significantly grow their share of the Australian personal loan market. Peer-to-peer lenders are now becoming an established part of the lending scene and new lenders are expected to enter in the next year.
Alongside the big banks, the regional banks, credit unions and non-bank lenders, the peer-to-peer lenders are offering competitive loan deals and winning thousands of new customers.
How does a peer-to-peer personal loan work?
Traditional loans from a bank or credit union are made using funds often sourced from depositors. The bank offers the saver an interest rate on their savings and charges the borrower a much higher interest rate on their loan. Peer-to-peer lenders cut out the bank in the middle and provide a low cost, online platform linking money from savers to borrowers.
Applicants for a peer-to-peer (P2P) loan will still need to provide identification documents and their bank account details. Borrowers who default on a P2P loan will be referred to a debt collection agency and the default will be recorded on their credit report.
Borrowers can often get loan rates based on their credit history. People with a good record of repaying credit and keeping up with bills can get a low rate. Higher risk borrowers can still get approved for a peer-to-peer loan but may be charged a higher rate of interest. Before applying for a peer-to-peer loan you might like to get a copy of your credit report from Veda Advantage or Dun & Bradstreet.
How can I find a peer-to-peer loan that suits me?
Before applying for any personal loan, you need to create a budget and work out how much you can afford to repay. You can use the Infochoice Budget planner Calculator to help you. And the Infochoice Personal Loan Repayment Calculator will assist you with finding out how big a loan you can afford.
Infochoice lists personal loans from all of Australia’s major lenders, including the big banks, the regional and mutual banks, credit unions, building societies, non-bank lenders and, in recent years, a growing number of peer-to-peer lenders.
For example, P2P lender RateSetter is an online marketplace where people lend and borrow money directly. RateSetter says by cutting out traditional middlemen both savers and creditworthy borrowers can get better rates. RateSetter’s Unsecured Personal Loan is currently charging rates as low as 4.04 per cent.
P2P lender Moneyplace is a new, online personal loans marketplace “where everyone can get a better deal.” Moneyplace loans have no monthly fees or early repayment fees. Moneyplace has cheaper rates if you have a good credit file. Moneyplace have three rates depending on your credit rating – 8.90 per cent for borrowers with an excellent rating, 10.90 per cent for good ratings and 14.00 per cent for borrowers with average credit ratings.
P2P lender SocietyOne provides Australians with unsecured personal loans and car loans. Rates start at 7.88 per cent.
These and plenty of other great personal loan providers are all listed on the Infochoice personal Loan comparison tables here.