One of the realities that many consumers face is that of debt. Credit card debt can be especially problematic. It comes with a high interest rate, and it can be hard to pay off over time. One of the ways you can ease the process of paying off debt is through debt consolidation.
However, there are challenges associated with consolidating your debt, especially if it is unsecured.
Difficulty Consolidating Unsecured Debt
When some consumers decide to consolidate their debt, they do so with the help of a home equity loan. The problem with this strategy is that now you have taken your unsecured debt and secured it with your house. If you can’t pay your debts, you could lose your home.
However, if you have more than a couple thousand dollars to consolidate, many banks won’t give you a loan. It can be difficult to convince a bank to give you a large unsecured debt consolidation loan, and it can be even harder to get one with a reasonable interest rate.
Use P2P Lending to Consolidate Debt
If you are struggling to get a debt consolidation loan, you might be able to get what you need with the help of P2P lending.
With P2P lending sites, like Lending Club and Prosper, you can get an unsecured loan of up to $25,000 or $30,000 and use it to pay off your smaller debts. The larger loan comes with one interest rate and one monthly payment, and this can shorten the amount of time that you are in debt.
While you still have to meet certain credit requirements, they are less stringent with a P2P lender than they are with a bank. This means that you can consolidate your debt with greater efficiency.
However, there are still difficulties when you use P2P lending. In order to receive the funds, you have to convince enough people to back your loan. P2P lending is done in small increments; each funder will contribute $25 to your cause. In order to get the money, you need to be able to convince enough people that you will repay the loan.
The good news is that you don’t have to handle the repayment of the loan. The P2P loan site makes all the arrangements, so you just make one payment and the money is distributed to all of your backers.
If you have more than $5,000 that you want to consolidate, it can make sense to consider P2P lending as one option to help you get your debt under control.