Peer-to-peer loans offer alternative to payday lending

While most will associate peer-to-peer lending as a way to voice your discontent with high street’s banking institutions and how much harder they’ve made it to access credit, using a crowdsourced funding option can result in much better interest rates for someone who is considering taking out a payday loan to help make ends meet.

Business start-ups have been using peer-to-peer lenders at an increasing rate as the financial crisis and resultant recession has left them with little lending options from major lenders such as Lloyds TSB or Barclays. The same issue – tighter credit restrictions – has driven many that have been locked out from personal loans from the high street to high interest rate short term loans from payday advance providers, but a movement is growing to encourage people to look into a peer-to-peer lending provider before they end up agreeing to a payday loan that could prove the first step in developing unsustainable debt.

Peer-to-peer lending does not leave banks or corporate lenders with heaps of cash from high interest and massive late fees collected from borrowers, as all the funds have been made available to personal lenders who can put as little as £10 or £20 of their own cash up for grabs. Lenders receive much better rates of return on their investment than they would from a savings account – even a tax-free ISA – and also gain the knowledge that their money is being used towards re-building the nation’s economy and helps people who could not get the funds they need from a traditional source..

Around £300 million has already been lent by the peer-to-peer lending industry over the past few years, with figures rocketing since the credit crisis. With more unsavoury behaviour from major high street banks coming to light – such as the Barclays Libor scandal – the common consensus from industry experts is that peer-to-peer lending will soon become even more popular than it currently is.

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