Blog Invest The Best Peer to peer Lending for borrowers in the U.S. 2021

The Best Peer to peer Lending for borrowers in the U.S. 2021

date October 8, 2020 time 6 min read 805 views

Since 2005, P2P platforms have seen a steady rise in popularity worldwide. They’re easy to use, have bank-beating interest rates and are consistently rated as some of the best forms of passive income. In this article, we’re helping you determine the best peer to peer lending platforms for borrowers in the US for 2021. Read on to discover which platforms offer the lowest interest rates and most flexible terms to borrowers.

Are you looking to take out a loan without extortionate interest rates or unfair credit checks? If you’ve been searching around online, P2P lending may have crossed your browser.

Peer-to-peer (P2P) lending platforms allow you to take out a personal loan on your terms, without worrying about unexpected fees and unfair exclusions. Along with the rise of crypto and other forms of decentralized finance, they’ve quickly begun replacing traditional lenders due to their fairer terms.

Read this article to find the best peer-to-peer lending for borrowers in the US in 2021.

What are peer to peer loans?

Online peer-to-peer lending connects lenders directly to borrowers — cutting out the middleman (aka the bank or other institutions). If you need a loan, you can hop onto a P2P lending site, fill out the necessary information and you should be given a loan in minutes.

There are two models for P2P lending. Traditional, collateral-free lending which operates somewhat similar to how banks operate based on risk assessment and collateral-backed. We’re going to tell you a bit about both.

Is peer to peer lending safe for the borrower
Is peer-to-peer lending safe for borrowers? These days it is quite safe (source: p2pempire.com)

Traditional peer to peer lending options

Like all P2P lending, traditional peer to peer lending connects borrowers looking for a personal fixed-rate loan with individuals looking to invest. 

On traditional platforms when you apply for loan money they tend to use their own credit assessment for borrowers instead of collecting collateral. While this can end up looking pretty similar to a normal credit scoring system, this credit assessment is often based on the lender’s closely-guarded algorithms.

Sometimes you can get a much better rate on one of these platforms. Just as likely, you’ll get a much higher rate. Here are some of the top platforms today.

LendingClub

LendingClub is a platform that has connected lenders with borrowers for more than 13 years. The platform enables you to apply for a personal loan in minutes.

  • Interest rates range from 10.68% to 35.89% APR, with no prepayment penalties.
  • You can stretch the loan repayment terms from 3-5 years.
  • A minimum credit score of 600 is required, along with a minimum credit history of three years. You must also state your reason for borrowing.
  • Personal loans up to $40,000 and business loans up to $50,000. The minimum loan amount is $3,025 but in some states, it is higher.

Note: Since writing this article LendingClub has announced significant changes to its lending model.

Prosper

Prosper was founded in 2005, making it the first peer to peer lending marketplace in the United States. Prosper is backed by leading investors such as Sequoia Capital and Francisco Partners,

  • Interest rates start at as little as 5.99% if you have excellent credit. The highest rates are up to 35.99% APR.
  • Terms are between 3-5 years.
  • Prosper carries out standard credit checks. You need a minimum credit score of 640 to apply.
  • The minimum loan amount is $1,000 and the limit is $40,000.
Peer to peer lending personal loans credit check
Personal loans from peer-to-peer lending are offering much better rates than traditional lenders today (source: pixabay.com)

The problem with traditional P2P loans today

When you borrow money with traditional P2P loans, your interest rate is still largely (not entirely) determined by your credit score. The lower your score, the more difficult it might be for you to secure the loan and the higher your interest rate might be. 

This is where new P2P lending platforms have come and changed the playing field. Benefitting lenders and borrowers alike.

New crypto-backed P2P loans

Like traditional P2P, crypto-backed P2P lending connects borrowers to lenders via an online platform. But rather than using property or personal items as assets or basing rates off credit scores, borrowers use crypto as collateral. 

This lets you get much lower rates on your loans and lets you unlock some of the USD value of your crypto portfolio.

MyConstant

MyConstant is a new crypto-backed P2P lending platform offering exciting interest rates for borrowers. Our platform cuts the cost of international transfers, slashes loan processing times from days to minutes, and allows you to take out loans against 70+ different cryptocurrencies.

Other features include:

  • Interest rates start from 6% APR and are no higher than 7% APR. 
  • Borrow any amount for 1, 3, or 6 months.
  • No credit scoring or background checks.
  • All funds are immediately accessible.
  • On MyConstant you can easily onboard from USD to crypto.
  • Can get a loan against multiple cryptos at the same time.
  • Maximum per one loan amount: $50,000

Nexo

Nexo claims to be the world’s largest and most trusted lending institution in the digital finance industry. They have been around for more than 13 years and operate using 40+ fiat currencies.

  • Interest rates with Nexo start from just 5.9% APR. All interest rates are fixed.
  • As long as you maintain the proper loan-to-value ratio with your collateral, you can extend the terms of the loan by 12 months an unlimited number of times.
  • Nexo automatically approves applicants with the required collateral and do not do credit checks. The downside is that you need to own NEXO coin to access the best rates.
  • You can borrow as little as $10 and up to $2,000,000 with Nexo (assuming you have the collateral). 

BlockFi

BlockFi is an independent lender in the US with backing from institutional investors such as Valar, Galaxy Digital, and Coinbase. Founded in 2017, they are slightly newer to the peer-to-peer lending game.

  • Interest rates vary but start from as little as 4.5%.
  • Loan duration is 12 months with the option to prepay.
  • There are no credit checks. You just need to have the required collateral.
  • The minimum loan amount is $5,000 in USD. 

Decentralized (DeFi) lending 

DeFi lending is crypto-backed lending through an algorithm instead of a platform. It allows you to directly take out crypto loans without having to undergo background checks. This means less strict terms and often lower interest rates. However, it also means rates might change on you when you least expect it and very little customer support

MakerDAO

MakerDao was founded in 2015. It runs on its native Dai decentralized stablecoin that is tied 1:1 with the USD. You can receive loans in DAI by using various cryptos like MKR as collateral. At present, over 400 apps and services have integrated Dai.

  • You must provide 150% of the loan value in collateral.
  • Terms are unlimited.
  • There are no background or credit checks.
  • There’s no minimum/maximum loan amount.
  • Rates vary depending on the asset you lock in for DAI.

Compound

Compound Finance is a sector-leading lending platform. It enables users to borrow popular cryptocurrencies like Ether, Dai and Tether backed by ERC20 tokens. Transactions are made using smart contracts on the blockchain. 

  • Interest rates vary between 2-12%
  • No term limits
  • There are no background or credit checks and loan amounts are unlimited
  • Must have at least 150% collateral backing for loans.

Is peer to peer lending safe for borrowers?

If you use an established site, then peer to peer lending is reasonably safe. The terms of the loan are agreed on according to the platform’s protocol before the transaction takes place and many platforms today are insured or use a third-party custodian for all funds.

When using cryptocurrency as collateral you should make sure you are clear on each platform’s liquidation policy. Crypto can be volatile and a sudden change in the market could eliminate your loan if you aren’t careful. Other platforms that don’t require collateral may hurt your credit score if you default on a loan as well.

Now everybody can loan money via peer-to-peer lending easily
Now everybody can loan money via peer-to-peer lending easily (source: ifec.org.hk)

P2P lending benefits to borrowers

Even the toughest critics have acknowledged some of the clear-cut benefits of getting a loan from a P2P lender. Here’s a list of a few.

  1. Online applications — as P2P lending is entirely online, the application process is usually quick and easy. This is great if you need a loan fast!
  2. Lower interest rates — because the middle-man has been cut out and there’s less overhead, lenders are usually open to giving borrowers low at lower interest rates. 
  3. Soft credit check — if your P2P lender is looking into your credit history, they’ll usually perform a ‘soft credit inquiry.’ Unlike a ‘hard inquiry,’ a soft one won’t affect your credit score. So even if you decide that the interest rate doesn’t suit you, or if you’re rejected — there will be no imprint on your credit score. 
  4. Payment flexibility — Many P2P platforms have better repayment flexibility. For example, at Lending Works, you can make an overpayment or even settle the balance of your loan at any time, with no extra costs involved. You can even change your monthly repayment date to suit your own finances. 

Why MyConstant offers the greatest peer to peer lending benefits for borrowers

When you choose MyConstant, you don’t have to worry about unfair interest rates or rigorous background checks. You can instantly access your USD loans or withdraw in any of our supported currencies whenever you like. Payment schedules vary from one to six months and rates start at just 6%.

Don’t get done over by high-interest rates and unnecessary fees. Borrow fair with MyConstant.

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George Schooling

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