Pros And Cons Of Peer-To-Peer Student Loans

As college tuitions continue to rise, students are faced with growing obstacles in the fight to finance their college educations. With companies such as People Capital and Green Note springing up across the web, could the growing trend of Peer-to-Peer lending within the student loan market be a viable solution? Let’s learn a little more about the Pros and Cons of Peer-to-Peer Student Loans:

1. Peer-to-Peer student loans are not all created equal, like private student loans, peer-to-peer student loan terms, rates, and conditions will vary from company to company. So just as you would with private student loans, you MUST do your research to ensure you fully understand what you are “getting into”.

2. Like private student loans, peer-to-peer student loans are not federally backed loans. It is important to remember that you will not receive all the benefits of a federal student loan with a peer-to-peer student loan. A peer-to-peer student loan should only be sought after once your “free money” options and federal financial aid options have been exhausted.

3. Be aware that many peer-to-peer student loan repayments will NOT be deferred until after graduation.

4. A few things to consider when shopping peer-to-peer student loans: is the peer-to-peer student loan legally compliant? Does the peer-to-peer student loan offer tax-deductible interest payments for borrowers? Does the peer-to-peer student loan have a origination fee?

5. If you need a private student loan, and are having problems obtaining such a loan because of little credit history or no cosigner, a peer-to-peer student loan may be easier to obtain.

Peer-to-peer student loans, are similar to private student loans, only they are funded by individuals instead of banks and private lenders. Like private student loans, peer-to-peer student loans are a better option than using a credit card, however federal student loans, scholarships, and grants are still the first options college students should be looking into when it comes to financing their college educations.