A reasonable analysis of comparing a peer to peer loan to a credit card proves that the using a proven P2P provider like Prosper is a winning strategy. And when compared to payday loans or credit cards it is not even close to a fair fight. This fact holds true no matter what your credit score is. But, based on the fact that peer to peer lending aggressively rewards top scores, the higher your credit score – the greater the advantage over credit cards.
The middle-class squeeze, in which inflation outpaces salaries, is a real phenomenon currently taking place in America and elsewhere. This is just one example of a trend which leads to our debt usage rising. The statement that borrowing is a part of life is increasingly true as both the amount of debt and the number of people using debt instruments has seen an overall climb even after the financial crisis of 2008. Life is full of unanticipated household financial shocks like a furnace breaking down in the middle of winter or a suddenly leaky roof. Living in this financial reality, the wisest thing that we can do in our financial planning is to start with a sound budget. Part of the budgeting process lies in making intelligent decisions about how to borrow.
That sound budget needs to choose the best possible option for borrowing. That option is always a peer to peer loan. The sooner we get one of these loans, the better off we will be period. Let’s take a moment to understand why this is the case.
Reason One – Unbeatable Interest Rates (Pay less and get more)
Prosper can offer a peer to peer loan of up to 35,000 dollars at unparalleled interest rates for unsecured debt. These loans feature fixed interest rates which serve the dual purpose of predictability and protection from outside market forces. Having fixed rates is important. It is impossible for interest rates to decrease much further in this generation of record low rates. Many adults today do not remember the double digit mortgage interest rates of 30 years ago. While that may be an extreme market condition compared to today’s standards, fixed interest rates protect borrowers if the prime rate does start to increase. When interest rates go up, and then eventually will, credit card rates are going to go up. Peer to peer loans are locked in and will not see this rise in interest rates. In the case of credit cards many rates also skyrocket after an introductory six month or one year period. Obviously the combination of a low and fixed interest rate is a very cost effective way to borrow.
Reason Two – Rewarding Good Credit Scores (Peer to peer lending does it better)
Not all of us have a perfect FICO credit score of 850 but many people have worked really hard to establish good credit and Prosper believes that should count for something. Prosper loans are more rewarding of good credit than credit cards and start at an unbeatable 5.99% interest. Financial institutions backed credit cards are not willing to take the risk on unsecured debts with interest rates in this range. And credit cards can almost never compete with a single digit fixed rate loan. These single digit interest rates are readily available when you choose peer to peer lending. Prosper interest rates are lower no matter what your credit rating is but this is particularly true for those with good credit. Those with good credit also receive a lower origination fee.
Reason Three – Greater Choice (You have the right to decide)
Another clear benefit of a peer to peer loan is the ability to have greater choice to borrow money. Using the secure Prosper platform, website borrowers are allotted a series of options in regard to loan amounts that match their given interest rate. This is clearly stated to allow for effective planning. The nature of peer to peer lending leads to loans being funded quickly and easily usually within days. You get the money that you want when you want it. On the flip side of the choice and ease of use of peer to peer lending is the chaos and complexity of credit cards. People who obtain a credit card do not have to come up with any sort of schedule or really have any idea as to how they will manage that card. Credit cards constantly force those who hold a balance to actively manage their account whether they like it or not. If people do not properly pay their credit cards then they face a variety of penalties including possible suspension or cancellation of those cards. The penalties instituted on temporary credit card defaulters by financial institutions are harsher than those given by Prosper. These include typically higher late fees or even an increase to a credit card lending rate. Borrowers have a say in determining when their payments will be made through Prosper without hidden fees or surprise penalties.
Reason Four – A Set Monthly Payment Schedule (Build a plan for your financial future)
One of the major advantages for those who borrow peer to peer is the ability to abide by a fixed set of terms which are agreed upon at the time of the loan. These terms include the principal, given interest rate and monthly repayment schedule. Credit cards are designed to accumulate debt and not eliminate it. This can be seen using the concept of a minimum credit card payment. Using a time value of money business calculator borrowers can quickly show the effect of only making minimum payments on a significant credit card debt. Interest owing on these debts can climb to well over 50 percent of the principal and take decades to fully pay off. And these astronomical expenses assume that you are not continually making purchases on that card. Additional purchases dig an ever widening hole of debt, expense and financial instability. Between this tendency to increase credit card debt and face a large interest payment each month, borrowers are well-served to choose to move their debt literally anywhere else. The set terms of a Prosper loan enforce a budget while providing cash in just days. Peer to peer lending also makes debt consolidation possible. If an individual has a couple of credit cards it can seem like a hopeless struggle to make any headway on that debt. Prosper can eliminate debt holdings through consistent monthly payments that are anticipated and easy to keep track of. In short there is a plan to escape debt through Prosper.
Reason Five – The Credit Card Comfort Myth (We’ve always done it that way)
A peer to peer loan is sometimes overlooked as an option because many people are more comfortable dealing with traditional financial institutions. This is a trap and it can cost you a lot of money in the long run. Most individuals have been linked to a certain bank or credit union for most of their lives. This is in clear contrast to peer to peer lending platforms which have existed for less than a decade. Any length of time spent looking at this decision-making process can spot the holes in it. It is time to change the way you borrow. If you could save thousands of dollars in borrowing interest payments for a major purchase why wouldn’t you? There is no reasonable answer to that question. Again it is time to change the way you borrow. It is fast and easy to get money right now from Prosper. You can even check your credit rating at no risk to your credit score. Ignoring this is a really poor decision, especially if this decision is made solely because of comfort and familiarity with credit cards. Just because most of us can name three credit card companies but not three top peer to peer lending websites does not mean that we should essentially throw our money away when holding debt. Instead we should inform ourselves and take advantage of this opportunity to save money.
Because of its relative infancy peer to peer lending is not always considered as a viable borrowing option. In reality peer to peer lending is the superior choice. It is much better than paying the incredibly high interest rates of payday loans or credit cards. These types of loans are built to keep you in debt permanently while taking choice away from you. Prosper rewards you for your good credit, offers far better interest rates and lets you make decisions are your own terms. Peer to peer lending is the less expensive and more flexible choice to get your cash today. Visit Prosper website for more information.