Who’s lending the money?
When you apply for a P2P loan, potential investors – regular people who are looking to grow their money with your interest payments – review your request, choose whether to finance the loan, and commit to funding all or just a part of it. (For this reason, there may be multiple people who are actually providing the capital you need.) Then, as you pay off your P2P loan, those investors receive regular payments until the loan term ends.
How much you can you borrow?
When you take out a personal peer-to-peer loan, you can generally request a loan between $1,000 and $40,000, although that varies by lender.
How payments work?
Like most loans, a P2P loan typically requires you to repay the principal with interest in fixed monthly installments. That monthly payment amount depends on the size of your loan, the loan’s term, and your APR, which likely includes an origination fee. An origination fee is typically a small percentage of the amount you want to borrow.
Keep in mind when you apply that the origination fee is deducted from the total amount of the loan before you receive it. The origination fees for LendingClub, for instance, range from 1% to 6%. So, if you’re approved for a $10,000 loan with a 5% origination fee (or $500), you’ll receive $9500 as a deposit in your account. Keep that in mind when you borrow, so you make sure you actually receive enough money for your goal.