Personal Loan Lenders

Financing Your Home Improvement Projects By A Peer to Peer Loan

A common way to finance home improvement projects is to obtain a home equity line of credit or a home equity loan. The major requirement is that homeowners have equity in their houses to qualify for these loans. Because housing prices have dropped so dramatically in recent years, many people do not have any equity to tap into, and they are unable to apply for a loan through their banks. The alternative to the bank loan is a peer to peer loan.

What Is a Peer to Peer Loan?

Peer to peer loans come from a relatively new type of social networking website that gives people who have money to invest an opportunity to place it in the hands of their peers. These investors are willing to do this because they are seeking a way to earn a higher rate-of-return than they can in some of the other financial vehicles that are at their disposal. They also have the desire to help people in their communities, and they earn a profit in the process.

How Peer to Peer Lending Works

When people need to borrow money, they will sign up for an account with one of the peer to peer loan companies. Some companies require that new members meet stringent requirements before they will be able to apply to borrow money. This may mean that they will need to have an excellent credit score. Those who cannot qualify with a great credit score do have other options; some peer to peer loan companies have more relaxed qualifications that will allow people with lower credit scores to obtain the money they need for their home improvement projects.

After homeowners find the right peer to peer loan company, they will need to tell the community what they would like to do with the money. In this case, they will need to explain that they need to make some home improvements but cannot afford to do so with the money they have in their savings or through a traditional home equity loan. Several investors who view this as a worthy cause will contribute an amount of money toward the project. Once enough investors have contributed funds and the desired loan amount has been reached, the homeowners will receive the money.

Repaying a Peer to Peer Loan

Just like with any other loan, borrowers will need to make monthly payments to repay it in full. They will make these payments directly to the peer to peer loan company who will pay the investors their interest payments. The bonus for the homeowners is that they may be able to qualify for a much more advantageous interest rate than they would with a bank, and they have the money they need to fund their home improvement projects.

Personal Loan Lenders