Whether you want to build an extension, redecorate or make some urgent repairs, finding the credit you need in the current economic climate is not easy. As well as incredibly strict lending criteria, banks are imposing high interest rates on their loans, which is either pricing people out of the market or forcing them to take on debts that can’t afford. However, if you’re looking to make some long overdue home improvements, a peer to peer lendingservice may be a quicker and cheaper alternative to the high street banks.

What is peer to peer lending?

This relatively new way of borrowing money puts individual borrowers and lenders in touch with each other without involving a major bank or building society. Personal loans, business loans and mortgages are traditionally provided by major financial institutions. However, peer to peer loans are directly arranged agreements between borrower and lender – usually with the help of an online specialist service.

What are the benefits of peer to peer lending?

Anyone can commit to lending money, and most peer to peer loans actually consist of several lenders providing small percentages of the total sum requested. Because ordinary people don’t have to pay the wages and bonuses of staff, or the usual overheads involved in running a business, they can offer loans far more cheaply.

The antiquated systems and lack of investment in technology that plagues major banks can delay the payment of funds significantly. And the various arrangement, completion and early-repayment charges that often apply can greatly increase the total cost of borrowing from a traditional lender. However, peer to peer personal loans are easy to arrange and usually require just one fee – added to the value of the loan. This gives people looking for home improvement loans an affordable and convenient way to get the money they need.

Lenders have an opportunity to make their capital work for them in a way that simply isn’t possible with traditional savings accounts at the moment. Interest rates have been at unprecedented lows for more than five years, and the effects of inflation can actually cause the value of savings to drop. Achieving interest rates of between 5 and 10 percent through peer to peer lending gives savers a far more effective way of growing their capital.

What type of home improvements can a loan be used for?

Most peer to peer lending services ask only that you declare what your loan will be used for. So, if it’s for homeimprovements, exactly how you spend it will usually be up to you. You may want to extend your home, or you might need to cover the cost of an expensive roof repair. As long as you use the money for the reason you gave during the application process, you shouldn’t run into any problems.

Why choose peer to peer lending over personal loans?

Peer to peer lending gives you much more flexibility than most standard, unsecured loans. For instance, if you find the money to repay your loan early, a peer to peer service won’t penalise you financially. Perhaps the home you’re improving is to be sold. If you sell it earlier than you expected, you can pay off the remaining debt without being charged early repayment fees – which usually apply to bank loans.

If your home is in need of a makeover, or you need to make some urgent repairs, relying on traditional forms of credit may be a costly and time-consuming process. However, by exploring the option of peer to peer home improvement loans, you could save yourself an enormous amount of time and money.