The pros of P2P lending for real estate investing
There are many advantages to using a peer-to-peer lending platform to finance your investments.
For one, they make borrowing easy -- especially if you’re used to the antiquated systems of the traditional mortgage industry. Since there’s no bank (or associated federal regulations) involved, the paperwork is whittled down significantly. You fill out an application, provide some proof of identity and, in some cases, upload proof of your income or employment. You’ll usually see loan offers within a few days (sometimes even hours).
P2P loans are also more affordable than traditional financing options. They come with lower interest rates thanks to lower overhead costs than banks and official lenders. They also have fewer origination and closing fees.
The cons of P2P lending for real estate
The biggest downside is that P2P lending can be risky -- especially if you don’t plan ahead.
Although you can take out a large peer-to-peer loan without a deep dive into your financials or credit, doing so can be dangerous. You could overextend yourself and borrow more than you can afford, putting your financial security (and credit) in harm’s way in the process.
Additionally, some P2P lenders only allow low loan-to-value ratios (65% is a common limit). You may need to find other ways to supplement your loan and purchase your properties.