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.
Last updated on April 8th, 2022 at 01:58 pm by Thomas Perrotta
Compare peer-to-peer personal loans
Peer-to-peer personal loan is one of the most popular up and coming types of financing in Australia. You can read about P2P lending here to help inform you of how it all works and whether it’s an option worth exploring for you, as well as compare different P2P personal loan offers right here with Savvy.
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Borrow between $5,000 and $64,000 with great low rates for excellent credit. Get a personalised rate estimate in 2 minutes that won't impact your credit score.More details | |||||||||||||||||||
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Apply for an unsecured personal loan and enjoy low rates for excellent credit. With no early repayment or exit fees, there’s a lot to love about this loan.More details | |||||||||||||||||||
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Apply for an unsecured personal loan between $2001 to $75,000 for a variety of loan purposes. Get a personalised rate estimate in minutes without impact your credit score.More details | |||||||||||||||||||
Harmoney Unsecured Personal Loan |
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Borrow up to $70,000 with personalised rates and repay over 3,5 or 7 years loan terms.More details | |||||||||||||||||||
Disclaimer: A comparison rate indicates the true cost of a loan. The comparison rate displayed for this advertiser is calculated based on a loan amount of $30,000 over 5 years and represents the effective rate on the loan. Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.
Peer-to-peer personal loans explained
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.
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.