Peer to peer lending has become a surefire way for consumers to eliminate credit card debt completely. These online lenders offer lower interest rates and reduced fees on debt consolidation loans when compared to traditional bank loans. While peer to peer lending is a relatively new option for unsecured personal loans, it is rapidly growing in popularity.
One of the primary reasons borrowers have turned to this new social lending platform is to get lower interest rates on loans to pay off their credit card debt. No longer do borrowers need to beg for a loan from their local bank branch.
Peer to peer lending sites allow individual and institutional investors to fund debt consolidation loans with as little as $25. The entire process is anonymous for both the borrowers and investors. A quick look at the loan listings will give a good perspective on how the process works.
For consumers that are looking for an easy way to get out of debt, peer to peer lending may be the answer. Prosper.com, one of the leading peer to peer lending marketplaces, revealed that over 50% of loans funded on their website are used for debt consolidation purposes. This is because they offer lower interest rates than most credit card companies and have no prepayment penalties. Other popular uses for social lending includes home improvement loans and even small business loans.
During the most recent credit crunch many banks started cutting back on unsecured personal loans in favor of low risk investments. However, consumers continued to search for other alternatives to consolidate their credit card debt.
A new U.S census report projects that Americans will collectively have over $870 billion in outstanding credit card debt in 2012. When most credit card companies charge upwards of 20% interest on balances, it can be almost impossible for consumers to get out of debt by just paying the minimum monthly payment.
How to Eliminate Credit Card Debt
For many American consumers a credit card consolidation loan can provide the relief they need to finally pay off their debt. By taking out an unsecured personal loan to pay off their outstanding debt it is possible to reduce their monthly payments on credit cards. While credit card consolidation sounds simple, there are many things consumers need to keep in mind before jumping into the process.
Credit card consolidation offers many benefits to consumers looking for debt relief. One of the primary advantages is that by consolidating debt into a single loan individuals can lower their interest rate. The reduced interest rate can usually help reduce a borrower’s monthly payment enough to help them pay off their debt quickly.
Benefits of Consolidating Credit Card Debt:
- Lower Interest Rate
- Reduced Monthly Payments
- Extended Repayment Period
Also by taking advantage of credit card consolidation a borrower can extend their repayment period. A longer loan term will help reduce their monthly payment. Smart consumers can take advantage of this situation by using the lower minimum payment to begin paying extra each month to be applied directly to the principle.
There is no longer a reason for consumers to keep paying the minimum payment on their credit card and wondering how they will ever get out of debt. Today there are many options available to consumers struggling to pay off their credit cards. As we covered above, peer to peer lending provides the means to reduce their monthly payments by consolidating debt into one unsecured loan.
While this option is not for everyone, the benefits of peer to peer lending frequently outweigh the concerns most people have about online loans. For more information about the entire process consider reading our “Getting Started Guide” on peer to peer lending.