Financial institutions and banks aren't willing to provide loans even to people with impeccable credit scores. So what is the best way for people with a low or low credit score to try to secure even a modest loan? The answer lies with the emergence of lending through social networks, a moderated online system that lets customers be able to borrow money directly from individuals.
The borrower has attracted to peer-to-peer loan websites as a simple option to obtain loans, even though the annual interest rates available by social lending institutions are often extremely high, as high as 35% or more for those with low credit ratings.
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If your credit score is excellent but peer-to-peer lending can be a simple option to obtain the short-term loan you need without having to jump through the hoops set by banks. Social lending websites were established to provide small loans (also known as "microloans" to potential entrepreneurs from third-world countries.
The concept was to allow lenders to provide money not just as an investment, but also to aid the causes of people in need across the globe. The demographic of the borrower has changed from entrepreneurs who are hopeful in developing regions to "average Joe" seeking a loan to fund home repairs, a brand automobile purchase, or for his daughter's wedding.
It's thought that peer-to-peer lending is more secure than borrowing money from banks because the personal connection gives borrowers an incentive to repay their loans. If you are the "bank" you are a neighbor or friend you have greater personal responsibility involved in the repayment of the loan.