Home > Personal Loans > Peer-to-Peer Personal Loans
Peer-to-Peer Personal Loans
Find out more about peer-to-peer lending in Australia and compare your options all in one place with Savvy.
Author
Savvy Editorial TeamFact checked
What is peer-to-peer lending?
Peer-to-peer lending, also known as P2P personal loans, is an alternative type of financing available in Australia. The difference comes in how you apply and the lenders that you can apply to: instead of submitting your application directly to a lender, you can apply on a specialised P2P lending platform. Your application is then considered by a range of private individual or company investors, who can approve and grant funds to applicants should they be satisfied with their application.
Because these are private financiers and not an institution with shareholders and extensive overheads, P2P services are often able to offer some of the most affordable loans on the market. An area where they can also be highly beneficial to borrowers is their lending criteria, as they aren’t as rigid as what you might find with other lenders such as banks. You can also be more confident that your application is being reviewed by a real person, rather than through a lender with a highly automated approval process.
In terms of the application itself for a borrower, it’s more or less the same as what you would do for a loan to a conventional lender: you’ll still need to provide the same types of documents and go through essentially an identical process between application and settlement.
How should I compare peer-to-peer personal loans?
There’s no great difference between how you should compare personal loans approved by P2P lenders and those by conventional financiers. Fortunately, you can compare both of these right here with Savvy thanks to our panel of diverse lending partners. The same principals apply in the areas that you should be mindful of, including:
Interest rates
One of the most important points to compare on any personal loan, your interest rate is the most significant contributor to the cost of your loan. As such, you should consider the rates offered by different P2P services before submitting your formal application, as doing so can save you a significant amount of money overall.
Fees
Fees can also end up costing you quite a bit on your personal loan in some circumstances, which is why you should also compare these when looking at different offers. Some of the fees that you may encounter on your loan (and how much they can potentially cost) are:
- Establishment fee: $0 to $600
- Ongoing fees: $0 to $20
- Late payment fees: $15 to $50
Borrowing range
Part of the personal loan comparison process is also finding a lender who can offer you the amount you’re looking for. While personal loans generally range from $2,000 to $75,000, this may not be the case for your lender or P2P service. For instance, many P2P loans are limited to around $30,000 to $35,000, while some lenders will set their minimum amount at $5,000.
Loan terms
Similarly, you should always ensure that the platform and lender you’re applying to can accommodate the loan term that you’re looking for. In most cases, personal loans are available from one to seven years, with shorter terms offering greater interest and fee savings. However, like borrowing, some individual lenders may offer lower maximums and higher minimums.
Repayment flexibility
Finally, having the ability to repay your loan on your terms is a valuable feature of personal financing. More specifically, this pertains to being able to make additional and early repayments on your loan, which is another effective way of cutting down on your loan’s cost. Some lenders may charge you for doing this, however, so you should prioritise those who don’t if you want to keep that option open.
Types of personal loan
With an unsecured personal loan, you can potentially borrow as much as $75,000 without the need to attach any valuable assets, such as your car, as security. These loans are the most widely available and often the quickest, with same-day approval possible.
Secured personal loans, on the other hand, make use of collateral. This lowers your risk profile in the eyes of a lender, potentially lowering your interest rate and expanding your borrowing power beyond what you may be able to get through an unsecured loan.
Variable interest rates remain open to fluctuation during your term. This means you can benefit from decreasing rates and save on your loan if the market heads in that direction, although you’ll also pay more if rates start rising.
Fixed interest rates are locked at the beginning of your loan and remain constant throughout your repayments. This acts as a valuable protection against interest rate increases, as your loan will be unaffected, but you’ll miss out on potential drops as well.
If you’re paying off multiple debts at the moment, particularly those with high interest (such as credit card debts), consolidating them into one payment can not only make them more convenient to manage but also potentially save you money overall.
Looking to take off on a holiday with your family but want to pay it off at your own speed? Travelling can be expensive, so you can distribute the cost of your next trip over a period you’re more comfortable with by taking out a personal loan to pay for it.
There are so many costs that go into making your dream wedding a reality, from venue hire to catering to dresses and suits and so much more. By taking out a personal loan, you can start planning the big day you want, even if you can’t pay for it upfront.
Home improvements are desirable for a range of homeowners to help keep their living space fresh and interesting, not to mention increase its value. You can get past the financial hit of renovations with a personal loan paid in instalments.
Personal loans aren’t limited to PAYG employees, though. If you’re running your own business, you can still be approved for financing by submitting tax returns and other alternative documents instead of payslips and utilise your funds however you wish.
There’s a variety of expenses which come with being a student, ranging from the cost of your courses, textbooks and computer to your accommodation. Taking out a personal loan can make these costs more manageable by spacing them out.
Some lenders offer green personal loans, which are designed to be used for energy-efficient appliances and products such as solar panel and air conditioning installation in your home. You can qualify for lower interest rates and fees with this loan.
Why compare personal loans through Savvy?
100% free
There's no need to worry about forking out to compare offers. Our service is free, so you can come back whenever you like.
Paperless applications
You won't need to worry about sifting through documents and visiting the post office, as they can all be submitted online.
Reputable lending partners
We've partnered with personal loan companies you can trust to ensure your comparison is a high-quality one.
What are the pros and cons of peer-to-peer borrowing?
PROS
Lower interest rates
Because the peer-to-peer platform is online, there are few overheads and the interest rate may be better than what you would get from a traditional bank. You may find the average rate is as much as 5% to 6% lower than what you might find with a bank and similar, or lower, than other online lenders.
Quick, easy applications
As an online service, peer-to-peer loan applications are simple to fill out. The approval process is usually quicker than the major banks too, with some peer-to-peer providers automating parts of it. Remember that you may not receive the money on the same day that you get approved. If you are in urgent need of funds, talk to the provider about their process and when you can expect to see the money in your account.
Simple repayments
Peer-to-peer providers usually fix the interest and repayment amounts at the start of the loan so that you can budget for them. The platform will set up your regular repayments as a direct debit when you first start the loan. Though some providers offer variable interest rates, they're less common.
CONS
Lower lending amounts
Peer-to-peer platforms usually have lower lending limits than the major banks, potentially capping out as low as $30,000.
Age requirements
Nearly all lenders will offer loans to anyone in Australia over the age of 18. Many peer-to-peer providers, however, require you to be at least 21 years old when applying for a loan. If you are aged 18-21, you may find you have fewer peer-to-peer options available to you, though they do exist.
Few redraw options
It is rare for a peer-to-peer lender in Australia to offer redraw options. If you do manage to find a provider with this service, remember to check their rules around redrawing funds and if any fees are involved.
The process of peer-to-peer personal loan approval
Compare loan offers
Before all else, you should do your research to determine for certain the best lender for your needs. You can do this by assessing each lender and deal based on the factors outlined above. Once you’ve chosen your ideal lender, you can move onto the application process.
Submit your application
Next, you fill out your application for a loan with an online P2P service. You’ll be required to submit the required documentation as part of this, which will include a combination of the following:
- Your last two payslips (90 days of bank statements and your employment contract may be requested)
- Photo ID such as your driver’s licence or passport
- Online banking details
- Information on existing assets and liabilities
Receive an outcome
Your P2P service considers your application and financial situation and will offer you an individualised interest rate. At this stage, they also set the loan term and repayment amounts. Should you be successful, your application will be considered further by the service.
Have your loan posted
Your P2P service then posts the loan on their platform. They disclose the terms of the loan and how creditworthy you are, but do not disclose any other personal information so that you remain anonymous.
Investors can go onto the platform and lend money to whichever borrower they choose. They can choose to fund the full amount, or part of, each loan.
Seek help
Once an investor approves and funds your loan, you're ready to go! Your P2P service collects the repayments from you and allocates the money to the investors, taking a small portion of these funds as a fee for service.
Peer-to-peer lending queries answered
Yes – however, that doesn’t mean that you shouldn’t do your research into different P2P services prior to submitting your application. Another area that you can research is the service’s investor requirements, which can potentially give you an idea of the types of lenders that could be operating on the platform.
Probably not – P2P lending is completed on an anonymous basis: your application is funded anonymously by investors who don’t know your identity either. Your financier may find out whereabouts you live in Australia during the application process, but that’s essentially the extent of their knowledge of you. Your P2P service also won’t disclose the identity of your investor should you request to find out their identity.
Most peer-to-peer platforms won’t allow you to list a guarantor or co-signer on your loan application. If your credit score and/or income is too low to get approval on your own, you may need to pursue alternative options. If you’re thinking of sharing a loan with someone such as your partner, you cannot put both your names on the application. The person who is listed on the application is solely responsible for all repayments, and the amount they borrow may impact their ability to be approved for further credit in the future.
Not really – like any other unsecured personal loan, you can essentially use your funds for whatever and however you like. Whether you're looking to alleviate financial strain by consolidating existing debts, cover steep medical bills or help subsidise larger investments like your wedding or a holiday, you can do it with a personal loan.
Yes – there are many P2P services that can also accommodate secured car loans in addition to unsecured personal loans. These are slightly different to the latter, as they’re designed for the express purpose of purchasing a vehicle. What isn’t different is the need to compare your options, which you can do here with Savvy. If you want help finding the right car loan for you, you can get a quick quote with us today and have one of our experienced consultants guide you through the process.
Helpful personal loan guides
Still looking for the right personal loan?
Personal loans come in all shapes and sizes, so read more about the ways you can use them, as well as how they might work for you.