Sounds too good to be true? It’s not!
Now, when you hear the word crowdfunding, you might think of websites like Kickstarter, GoFundMe, and Indiegogo. But, that’s not what we’re going to be using to attack that credit card debt.
In this article, I’m going to explain a few ways that you can wipe away your credit card debt and get a better interest rate by using debt crowdfunding, also known as peer to peer lending.
This is when a bunch of investors use a third party marketplace to find loans with good returns. In the marketplace, borrowers, like you, will have their loan listing submitted to and reviewed by these investors. There is no intermediary, like a bank, and far less overhead, translating to awesome cost savings for you, as a borrower.
Before we get started, let’s take a look at what Lending Club, one of the major p2p lending companies out there, says about their borrowers.
“71.17% of Lending Club borrowers report using their loans to refinance existing loans or pay off their credit cards.” – Read more.
Here are a few steps that you’re going to need to go through in order to get a low interest loan that can be used to refinance your debt.
#1. Who can use these new lending companies?
Almost anyone! You can get a loan for:
- Home improvement
- Debt consolidation
- A Business
- Medical expenses
- Auto
- A Vacation
- And more.
If you’re not having success with a personal fundraising website, like GoFundMe, then peer to peer lending is a great alternative. Seeing as the rate that you’ll get is likely less than your credit card interest rate, it’s an easy way to refinance your debt.
But, don’t take my word for it! Check out this review of Prosper, one of the top lending companies.
“The application process was simple and fast. I was approved for a $15000 loan with a low interest rate to consolidate loans and credit card balances with higher interest rates.
I was fully funded in less than a week and the money was deposited in my checking account within 2 business days. I am saving at least $300 a month, and I will pay off my debt in 3 years which is at least 3 years sooner than it would have been without the prosper loan.” – Source.
#2. Choose an online lending company
There are a lot of lending companies out there that you can choose from to secure a low interest loan. But, not each one has the same terms or qualifications.
Before choosing one, search around to see what kinds of reviews others have made after using their website. In my research, Credit Karma has some good comprehensive reviews of the major online lending sites out there.
I’d recommend looking into Prosper, as they’ve gotten some great reviews and have some advantages over Lending Club.
#3. Check your rate
I know what you’re thinking!
“Will checking my rate impact my credit score?”
The short answer is no. When you check your rate on one of the major peer to peer lending websites, it qualifies as a “soft inquiry” not a “hard inquiry,” which would impact your credit. Here is an overview of the differences.
When you check your rate, you’re going to have to enter how much you’d like to borrow, the purpose of the loan, and the quality of your credit score.
Depending on what you’re using the money for and your credit quality when you check your rate on Prosper, you’re going to receive a different APR (annual percentage rate of charge).
#4. Understand the terms
This is probably the most important aspect of securing a loan from an online lending company.
You’re going to have to research each platform that you’re interested in, but to make the process easier, I’ve outlined a few major bullet points to keep in mind when securing a Prosper loan.
- Unsecured loan. You do not need to put up any collateral.
- No penalty for paying off your loan early.
- No partial prepayment penalties.
- Fixed repayment rate.
When your listing is created and investors have committed to your loan, the funds will be deposited in your bank account within a few days. Each month, Prosper will make an automatic withdrawal from your bank account in accordance with the monthly repayment schedule.
#5. Leave a review.
I’d love it if you took a second to leave a review on this blog post after you secure a loan. It would help out so many others who are wondering whether or not online lending companies like Prosper, Lending Club, and Upstart are legitimate, and which is best!
Remember, it’s best to check your rate on multiple websites before committing yourself to one. Of all of the reviews that I’ve read, customer service was the number one concern with many of these lending companies.
The process to obtain a loan is very easy and straightforward, but should you have any issues with the platform or your experience, it might be less easy to sort them out.
