Getting a Peer Loan on Bad Credit

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We’ve all been there. Maybe a missed payment hit your credit score or you’ve had bad credit for a while. You might just not have much credit history, a major factor in bad credit but really no fault of your own.

Banks will probably not even look in your direction. You could get a high-interest credit card but that might be part of the reason you’ve got bad credit in the first place. Besides the temptation from another credit card burning a hole in your pocket, this type of money will hurt your credit score even more. Credit card debt goes on your credit score as “revolving debt” which is the worst kind and really dings your score.

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Fortunately, peer loans have become a great way to get the money you need even if your credit score is less than stellar.We will cover the process for getting a peer loan on the Prosper platform in this article. The process is basically the same on other platforms.

More important that getting a bad credit peer loan though is what you do with it and how to get your credit back on track afterwards. After detailing the process of getting a loan, we’ll look at some factors in bad credit and how to get back on track.

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Getting a Bad Credit Peer Loan

Prosper makes personal loans of up to $35,000 and for terms between three to five years. The interest rate is fixed and you will have several opportunities to reject the loan offer before taking the money. Your monthly payment on the loan is made by check or automatic withdrawal.

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The company will do a “soft check” on your credit to pre-approve your loan and assign an interest rate. This soft check does not affect your credit score as an inquiry.Depending on the loan term and how many you’ve had before, you will be able to see the range of interest rates that might be available. Categories D through HR (high risk) are generally what most would consider bad credit and will mean rates from 21% to around 36% on an annualized basis.

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Your credit score must be at least 640 to get a loan on the site and average credit scores are between 664 and 679 for the lowest three bad credit categories.

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If Prosper offers a loan rate and you accept the terms, you then complete a loan listing that will go on the site for investors to fund.

Prosper itself does not actually make loans but offers investors the opportunity to loan you money and earn the interest on proceeds.

Investor demand for loans is very strong right now so you have a pretty good chance of getting your loan funded.

Getting documents submitted quickly is the best way to make sure you get your money as quickly as possible.

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Prosper charges a fee of between 1% to 5% on your loan, which will come out of the money before it is deposited into your bank account. The rate is pretty standard and you are looking at the high-end 5% for a bad credit peer loan.

There are two fees you can avoid. Late fee >> if your payment is more than 15 days late Failed payment fee >> if your check is returned or automatic

withdrawal does not go through. Both these fees are $15 each on Prosper peer lending loans.

Monthly payments on your loan are exactly like a traditional bank or credit card loan. Just sign up for automatic withdrawal or mail a check each month. You can pay off your loan early at any time without any pre-payment fees.

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Getting your Credit back on Track with Peer Lending

Peer loans can actually help you improve your credit score. o The regular payments you make on your peer loan will go on your

credit report and improve your credit payment history. o Peer loans go on your credit report as “non-revolving” debt. Credit

rating agencies like this type of debt better than credit card or “revolving” debt because you cannot continuously keep borrowing on the credit line.

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o Set a realistic financial goals and a budget you can actually keep.

o Understand the difference between good debt and bad debt first, then figure our how to pay off bad debt while using good debt to meet your financial goals.

o Having bad credit is not the end of the world. Most of us have been there and fortunately, there are things you can do about it.

o After you get your peer loan, just make sure you use it wisely and get your credit back to where it should be.

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