Peer-to-peer (P2P) lending is on the rise, with more online money lending apps popping up each time. Though local money lenders still have great reputations in Singapore, the financial industry is getting saturated with online P2P lenders. Part of the reason for their rising popularity is the ease of applying and getting approved for loans.
However, the convenience of P2P lending comes at a cost. Here are three big reasons for you to reconsider private money lenders instead.
Funds are readily available
Private money lenders are better established than P2P lenders, so they have better access to funds. That’s why it’s easier to get approved for loans and get the money you need.
P2P lenders, on the other hand, rely on individual investors to pool money for loans. If not enough investors chip in, loans may not be fully funded. Some may even be disapproved.
Though P2P lending is becoming more popular, with more people becoming investors, the sources of funding in P2P lending platforms are still not as reliable as private money lenders. P2P lenders may run out of money sooner than private lenders do, jeopardising the loans they give.
With that, you are better off going for private money lenders when you need funds right away. These lenders provide a more secure way of acquiring loans.
Lower interest rates
Though getting loans from P2P lenders is generally easier, these platforms tend to charge higher interest rates. Though P2P lenders are regulated by the Monetary Authority of Singapore (MAS), these lenders often operate online, and this setup tends to be more complicated. Thus, many of them can find ways to charge higher interest rates than normal.
If you want to make the most of your money, and avoid wasting too much on interest payments, private money lenders are still better options. Some private lenders even offer online loan applications, so you can still enjoy this kind of convenience while being more secure with your lender.
Lower risk of default
Statistics have shown that P2P lenders suffer from significantly higher rates of default than private money lenders. This is another consequence of the easier approval of loans with P2P lenders – less qualified borrowers tend to get approved even if they lack the means to pay back their loans. This results in more defaults for P2P lenders.
As a borrower, you may not want to deal with lenders who have a high rate of default. It may tell you the lenders are predatory or resort to unethical practices. Private money lenders have better reputations in this area, so it’s wiser to go to them instead of taking out loans.
Conclusion
While P2P lenders offer a faster and more convenient way of taking out loans, nothing beats the security and peace of mind you can get from private money lenders. With them, funds are more available, interest rates are lower, and they pose a smaller risk of defaulting. You can better make use of the money you get from a loan as a result.