What Are the Differences Between Peer to Peer Loans and Cash Advance Loans?
After the Great Recession, banks tightened up their lending practices to all but the most pristine of borrowers. But despite the major banks’ freezing of credit, the laws of supply and demand took over. The demand for credit didn’t crater along with the housing market. Peer-to-peer, or P2P lending and cash advance loans quickly filled the vacuum.
More than ten years after the housing market crash, the economy and banks’ willingness to extend credit has mostly recovered. Thankfully, borrowers have more options now than ever before if they need a loan. So, what’s the difference between a P2P loan and a cash advance loan? We’ll explore below.
What Is a P2P Loan?
For unconventional borrowers, peer-to-peer loans are a go-to source for a quick infusion of cash. P2P lending sites are all over the internet, and they charge a fee to put investors in touch with borrowers.
With a P2P loan, borrowers can pay lower interest rates than they would with conventional bank loans. Investors get to enjoy significant returns that they wouldn’t have the opportunity to find elsewhere.
P2P lending sites foster an environment that is full of opportunities, where people can borrow and lend money on a personal basis with minimal oversight and overhead. As the industry has grown, the restrictions on borrowers and lenders have gotten more lenient.
Why Would Someone Want to Use a P2P Lending Site?
Peer to peer loans can be used for almost anything, including a HELOC, a traditional bank loan, mortgage, business loan, or personal loan. P2P loans can go up to as much as $40,000. The process is extremely fast, unlike a conventional loan application. For borrowers looking to get a P2P loan, the process can take as little as three days. Rates are competitive, and payments are fixed in monthly installments. If you apply for a P2P loan, your credit score will not be affected, and the credit requirements are more lenient, with scores as low as 600 usually needed to qualify.
What Is a Cash Advance Loan?
A cash advance loan is also sometimes referred to as a payday loan. It is a loan that is issued for a short period, either a few weeks or a couple of months. Borrowers must pay an initial fee to take out the loan. Instead of charging interest, a payday or cash advance loan lender will charge the initial fee.
For people who wish to open up a line of credit, it’s crucial to understand the different types of loans available. Depending on your situation, your financial needs, and your ability to repay the loan can determine which type of credit instrument is ideal for you. Always shop around for a direct lender and know exactly what fees and interest rates are involved before taking out a loan.