Peer to Peer Student Loans

What Are Peer To Peer Student Loans...

Peer to peer student loans, or the act of peer to peer lending is best thought of as one person making a loan to another. With peer to peer student loans, an individual takes the place of the typical lending channels, such as a bank or credit union. Peer to peer lending is really nothing new, however with the help of the internet it is rapidly infiltrating the student loan market.

How Do Peer To Peer Student Loans Work...

The process of peer to peer student loan lending will differ from one company to the next, but it basically works similar to private student loan lending (again, with the bank/credit union being replaced by an individual). Typically, borrowers sign up on a peer to peer lending website, and complete a loan application. The borrower will then qualify for a particular rate, based credit score and other factors. If the borrower’s request gets approved by the peer to peer lending company (based on credit score and other factors), the loan request will be posted on the company’s website and individual lenders will be able to consider making the loan.

Peer To Peer Student Loans Vs. Federal Student Loans...

Unlike federal student loans for college, the government does not back peer to peer student loans. Peer to peer student loans will typically not offer as good of rates, terms, and repayment options (compared to federal student loans), which is why you should exhaust all of your federal student loan opportunities before considering peer to peer student loans. Much like private student loans for college, peer to peer student loans can differ from company to company; so make sure you understand the terms and conditions of any peer to peer student loans before you borrow.

Peer To Peer Student Loans Vs. Private Student Loans...

Much like private student loans, peer to peer student loans are privately funded loans, with the difference being a person(s) instead of a bank or credit union funds them. What sets peer to peer student loans apart from private student loans, is that peer to peer student loans may be easier to obtain for those with little credit history, and may offer lower interest rates to qualified borrowers (in comparison to banks or credit unions). Similar to private student loans, peer to peer student loans will differ from company to company, so you will want to do your research before committing to any loan.

Who Needs Peer To Peer Student Loans...

College students who can not secure enough money to cover their college expenses through scholarships, grants, and federal Financial Aid for College (including federal student loans) may choose to look into peer to peer student loans. You should not consider peer to peer student loans until you have exhausted all of your “free money” for college options (scholarships and grants), and your federal financial aid options (federal student loans). Those who do not qualify for private student loans because of little credit history, may have an easier time securing peer to peer student loans.

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