How to Use Peer-to-Peer Student Loans to Pay for College

How to Use Peer-to-Peer Student Loans to Pay for College

    With the amount of available credit in the United States shrinking dramatically over the last year, banks have become much more selective about what type of loans they are willing to provide. Private student loans were one of the first types of loans that banks stopped offering because of the risk associated with providing loans to individuals that don’t necessarily have an immediate means of repaying the loans.

    As a result, the only student loans that many students have been able to take out are publicly-backed Stafford loans. These loans are rarely enough to cover the full cost of tuition, leaving many families without an immediate means to pay for college. If you are having trouble finding a private student loan online, there may be a few alternative sources where you could get private student loans that you haven’t considered.

There are now a number of companies, such as Prosper, Lending Club and Fynanz that provide students the opportunity to borrow money from individuals to pay for the college in the form of peer-to-peer student loans. With these services, students create a listing for a loan on a peer-to-peer loan website and then individual investors can opt to fund part of the peer-to-peer student loan that the student is hoping to take out.

  With Prosper or Lending Club, the loan that the student will be taking out will start repayment immediately and amortize fully over a three year period. Some of the peer-to-peer lending firms that deal exclusively in peer-to-peer loans, such as Fynanz, may provide students some deferment options which will make it so that they don’t have to repay the loan immediately, and instead students can begin repaying the loan after college.

Typically the interest rates that students will repay on their loan are comparable to what student would pay if they were to take out a private student loan from a bank.

  Publicly-backed loans from traditional lenders should be the first choice for students looking for financing options to pay for college, but peer-to-peer student loans can provide a great secondary financing option for students that need additional funding for college.

How to Use Peer-to-Peer Student Loans to Pay for College

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