A peer-to-peer auto loan is an interesting alternative to a car dealership financing or bank loan. These loans typically help you shop similar to a cash buyer and are unsecured, so there is essentially no restriction on the type of car you purchase. Interested to know more about peer-to-peer loans? Read on.
How Peer-To-Peer Lending Works
If you have a high enough credit score, peer-to-peer lending may be an option for you. There are a number of peer-to-peer lending services available online – these websites will require you to key in some basic information like your name, email ID, address, etc. The site will then likely ask you how much you need to borrow (typically the limit is $40,000). Based on the information you entered, your application will be reviewed and approved.
You’ll then be asked to pick a certain loan that is suitable for your monthly payment and interest preferences, and, voila, the funds will be deposited into your account. Once you receive the loan, you can start paying back your private benefactor over a period of time.
How Is Peer-To-Peer Lending Different from Regular Auto Loans?
Peer-to-peer loans have different rules and make shopping for a car a lot easier. Here’s how these loans are different from regular loan options.
They Are Unsecured: A peer-to-peer loan is not secured against your car. This means your car cannot be seized if you fail to make the due payments. However, keep in mind that your credit score will be significantly affected if you miss making your monthly payments.
These Loans Enable Cash Shopping: Many dealers will confuse you with the numbers of their payment plans, leaving you paying a lot more than you need to. Buying a car with cash outright nullifies many of these tricks and can also give you some serious negotiating power.
There Is No Prepayment Penalty: If you try to repay a traditional loan before schedule, you will likely need to pay prepayment penalties. With peer-to-peer loans, there’s no risk of this happening.
The Interest Rate Is Usually Lower: Peer-to-peer loan borrowers typically pay less interest than those who opt for traditional loans.
If you are interested in taking a peer-to-peer loan, you can get the process started by checking your credit score. Then, visit a peer-to-peer lending website and check out your options.