Over the last 6 months I have been doing a lot of research on alternative sources to borrow money. What do I mean by alternative sources? Basically anything besides credit cards and home equity lines of credit. The best sources I have found are:
Peer to Peer Lending
Peer to Peer Lending (P2P Lending) is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. So basically you go to one of these P2P lending sites and you enter in some personal information (income, length of employment, etc), how much money you are looking to borrow and the purpose. Then they will pull credit and may ask you to verify some of the information you are provided. At this time you will be quoted the interest rate and terms of the loan. If you accept the terms, then investors on the site will be able to fund a portion or all of your loan. I have seen a wide range of interest rates offered, and generally they are much better than a credit card. There are many P2P Lending options and here are a 3 of the most popular:
Founded by ex-Googlers, Upstart is the first lending platform to leverage artificial intelligence and machine learning to price credit and automate the borrowing process. Upstart has demonstrated strong credit performance1 and maintains one of the industry’s highest consumer ratings according to leading consumer review sites. Upstart is one of the first to apply AI/ML to the multi-trillion dollar credit industry. Upstart goes beyond FICO, using non-conventional variables at scale to provide superior loan performance and improve consumers’ access to credit. According to Upstart, “You are more than your credit score. On Upstart, your education and experience help you get the rate you deserve.” Thus, loan eligibility is decided on factors that go beyond the FICO score, such as the school of graduation, academic performance, area of study and work history.
Prosper was founded in 2005 as the first peer-to-peer lending marketplace in the United States. Since then, Prosper has facilitated more than $14 billion in loans to more than 860,000 people. Through Prosper, people can invest in each other in a way that is financially and socially rewarding. Borrowers apply online for a fixed-rate, fixed-term loan between $2,000 and $40,000.
Lending Club Corporation is a premier player in the peer-to-peer lending space. Lending Club is a giant in the online market place that connects lenders and borrowers; the total loans issued as of March 2018 amounted to $35,940,013,016.
According to Lending Club: We’re a technology company built on the belief that innovative, creative solutions deliver more value and a better experience. We’re leading the governance of a new industry, developing ethical, responsible ways to bring greater value and better opportunities to customers. Accessing credit should be seamless. We’re committed to making borrowing and investing simple and easy for everyone. Everyone deserves a better financial future if they strive for it. We’ve built a marketplace that keeps costs low and opportunity high.
2 other very exciting sources I found are SOFI.com and Lightstream.com.
SOFI is an online lender that uses technology and innovation to keep their expenses low, which enables them to offer very competitive rates on personal loans. During my research I applied for a loan with SOFI and was offered a rate of 7% fixed for a term of 3 years. But I found their process cumbersome and after verifying my income, they changed my terms and increased my rate. In all fairness I am self employed and my last year tax returns have income from 2 companies in 2 different states (I was splitting time between the 2). I understand their process and imagine it would be much easier if you have w2 job or very simple tax returns. However see my experience with Lighstream below.
Lightstream is the internet banking division of Suntrust Bank and is my personal FAVORITE! I am self employed with complicated tax returns and a credit score of 800+. I applied for a loan on their website at 5:30 PM and requested a 3 year loan of $15,000 for some home improvement projects. I was offered a rate of 4% (this is unheard of for unsecured loan and interest rates have gone up a little since then) and was approved 20 minutes later. The money was in my account 36 hours later!! I was completely amazed by the rate, simplicity, and speed which the loan was approved. Check out their video: