Looking for a loan? Check out the marketplace
Non-traditional lending platforms growing
ORLANDO, Fla. – When you think of taking out a loan, do you automatically think of heading to the bank? Well today, experts say more people are heading to the "marketplace."
It's the online marketplace to be exact.
The number of non-traditional lending platforms is growing and industry experts say more and more consumers are using the loans for nontraditional reasons.
People like TJ Clayton, he and his wife were looking to adopt, they thought they'd have at least a year to save but when they got the good news that their baby was coming in a matter of weeks they needed money fast.
TJ says that because of the quick timeline traditional adoption grants and loans weren't an option for him. He went online for a marketplace loan.
Marketplace or "peer to peer" loans are attracting more institutional investors. Meaning more cash is available for borrowers like TJ who apply online.
Bob Gerstemeir, Chairman of The national Association of Personal Financial Advisers, says this alternative form of borrowing is becoming more mainstream.
"We're seeing that as far as the growth goes, as the number of loans that are out there, the number of people that are knowledgeable of it. The growth in the marketplace lending has been almost exponential." He says.
That exponential growth includes the launch of new lending platforms as well as dramatic increases in the number of loans originated.
In 2014, the online company Prosper originated $1.6 billion in loans on their platform, up from $369 million in 2013.
Industry experts say some consumers are now coming to marketplace lending to fund big purchases that you might not typically think of getting a loan for including home repair, elective medical procedures and like TJ, adoption.
Ron Suber, president of Prosper Marketplace, says the benefits of this type of loan are lower rates, speed of approval and consumers can log on from anywhere.
"They can share information with us, we can make offers for credit and we can often fund their request for a loan in three or four days."
As with any loan though, financial adviser Bob Gersteimeir says it's important to read the fine print in the contract, and understand the risk of borrowing.
"If a company hasn't been around and is just starting out, look closely," he says. "make sure that it's the type of company you want to be working with."
In terms of fees and interest rates, most of these marketplace lenders have a loan origination fee that can be between one and six percent. Interest rates can range from five to 30 percent depending on the borrower and platform.
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