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Finding a personal loan with favourable terms doesn't have to be difficult, no matter what you're borrowing for. If you're looking for a competitive personal or business loan, consider the benefits peer-to-peer (P2P) lending has to offer.
Taking out a peer-to-peer loan involves borrowing money from individual investors, where the "lender" simply acts as a facilitator for the loan. By lending their money, the investors gain access to an attractive fixed income asset class that can yield better returns than other investment options. Borrowers can also take advantage of lower rates that are based on their credit scores. All this is facilitated by a peer-to-peer lending platform that connects the people looking to borrow with people looking to invest.
Peer-to-peer (P2P) providers do not match individual lenders directly with a borrower. Rather, they enable the lender to invest in a portfolio of consumer loans. In other words, the P2P provider facilitates a platform where investors can finance a portfolio of loans and earn interest on what they lend, while borrowers are given an individual rate based on their credit score.
Various lenders offer peer-to-peer loans in Australia, each with its own product offering and rate. The table below is a quick guide to Australia's P2P lending landscape:
|Peer-to-peer lender||Type of loans offered||Loan amount||Loan term|
$2,000 up to $4,000,000
3 to 5 years
$5,000 to $50,000
3 to 7 years
$2,001 to $50,000
12 to 60 months
$5,000 to $50,000
1 year to 2 years
$50,000 to $300,000
2 years and 5 years
$30,000 to $500,000
1 to 5 years
$10,000 to $5,000,000
12 to 60 months
$5,000 to $50,000
3 to 5 years
The Government Backed Guarantee on Deposits was set up to protect investments up to $250,000. They do not apply to funds in peer-to-peer lending as it only applies to institutions authorised by the Australian Prudential Regulation Authority (APRA).
When peer-to-peer personal loans launched in Australia, one new aspect about these loans was that the interest rate was personalised to the borrower. Now, banks and other non-P2P lenders have been embracing this. You can now find many risk-based personal loans from major banks as well as smaller standalone lenders and credit unions.
Many banks and lenders are also offering more competitive rates and embracing innovative technology in order to remain competitive.
Check the credibility of the website or platform that you're considering. They should have a credit license listed on the bottom of the page and check what banks or services they are affiliated with.
The rates offered by the peer-to-peer lender are usually lower than those offered by the banks, but you should also see whether they are fixed or variable.
Take a look at the comparison rate to see how much the loan is likely to cost you with the fees included, and remember to check whether you will need to pay any upfront fees to set up the loan.
Some peer-to-peer lenders may not be able to offer you as high a loan amount as other banks or lenders, so check to see that you'll be able to borrow what you need for as long as you need it.
The lender's reputability should also form part of your comparison. You might want to read independent customer reviews online, see how easy the lender is to be contacted, and how transparent they are with their fee and rate information.
As a borrower, you want to ensure the person you will be borrowing from is reliable and that the lender has strict guidelines in place to ensure no unscrupulous investors find their way into the lending network. Check out the lending requirements before you apply to see the type of people you will be borrowing from.
While you want to check that you are eligible, you also want to ensure that the peer-to-peer network doesn't have borrower eligibility criteria that are too relaxed. Some overseas peer-to-peer networks who started lending to borrowers with bad credit failed due to a high number of defaulted loans, so you want to ensure the lender you go with doesn't engage in high-risk borrowing behaviour.
Peer-to-peer lending is an alternative credit option to consider. With competitive rates, quick approval times, and not to mention a way for investors to diversify their portfolio, peer-to-peer lending is making its mark on the credit industry.
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The Special Fixed Home Loan from Endeavour Mutual Bank is a fixed rate mortgage for owner-occupiers and investors.
You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.
You'll receive a fixed rate of 10.5% p.a.
Apply for up to $50,000 to use for a variety of purposes without needing to add security. Available to self-employed applicants. Note: These rates are available until 2 February 2021. Credit, eligibility criteria and terms & conditions apply.
You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
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A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
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