**This post may contain affiliate links. I may be compensated if you use them.

**Money We Have has NO association with any peer-to-peer lenders. There are websites linking to this page that imply that we’re connected, but this is not the case. The below article is strictly for educational purposes. I do not endorse any peer-to-peer lender or payday loan company.

Social trends are changing the way we do business on a daily basis. Peer-to-peer services such as Airbnb and Uber are often portrayed in a negative way, but the reality is, they offer something people want and now it’s starting to catch on in the Canadian banking sector.

Our banks are old school when you think about it. Sure we have debit and credit cards, e-mail money transfers and online banking, but when it comes to getting a loan, it’s still a slow process to get approved. Not only that, we get charged an insane interest rate on credit cards so it’s no surprise that peer-to-peer lending is starting to gain some traction.

What is peer-to-peer lending?

“Peer-to-peer lending brings together qualified borrowers and private investors in a reliable and online format.” says Kevin Sandhu, Founder and CEO or Grouplend. “We leverage technology to offer a cheaper, faster and more convenient experience for our customers.” In other words, peer-to-peer lending also knows as “P2PL” or “social lending” is looking to cut out the middleman e.g. the banks.

Borrowers fill out an online application and after a few minutes, you’re given a quote. If you decide to move forward and your documents have been verified, you can expect to see funds deposited directly into your bank account within 24 hours.

Does it save you money?

Social lending doesn’t act like a bank; there’s no physical store, nor can you make deposits, since everything is done online, it’s easy for them to pass the savings on directly to consumers.

Rates are unique to each individual borrower but they range from 6.3% – 17.5%, that represents a savings of up to 40% compared to credit cards or other bank products. There’s no set rate for everyone, your individual rate is calculated based on your creditworthiness. The more creditworthy you are, the lower your rate is.

If you’re looking to access cheap credit then an unsecured line of credit, or a home equity line of credit will usually be cheaper. Social lending is loans with a fixed rate and where you pay a fixed amount, this helps you get out of debt as opposed to picking up more debt. You can pay off the loan anytime you want with no pre-payment penalties.

Peer to peer lending

Is it safe?

There’s always going to be fears but peer-to-peer lending is incredibly safe in Canada. “Our investors (lenders) are passive investors in the loans, meaning they do not see any personal information about our borrowers” says Sandhu. Lenders are only accepted if they are accredited investors and meet regulatory and securities issuance requirements in Canada. There won’t be any loan sharks showing up at your door looking to collect their pay.

As far as your credit score is concerned you don’t need to worry since P2PL companies like Grouplend can have a personalized quote within a few minutes without any credit checks. Since there are zero risks, you might as well get a quote just to compare rates.

What are the drawbacks?

Not everyone can take advantage of peer-to-peer lending. If you have a bad credit score (under 690) you’re not going to get a loan. If you fall into this sub-prime market be aware that lenders that do offer you a loan may be trying to take advantage of your situation.

Currently, there’s a lack of regulation in the industry which can definitely be concerning, but this is more of an issue for lenders as opposed to borrowers. Grouplend is one of Canada’s first peer-to-peer lending services, and as more companies come online, expect to see more changes within the industry.

Be careful of lenders claiming to be peer-to-peer lenders

The term peer-to-peer lending is relatively new and some fraudulent loan companies are using the term to advertise safe and reliable loans. If any loan company is asking you to wire them money or to provide a bank draft to pay for “fees” before they’ll issue you a loan, you should be suspicious. These loan “companies” will keep making up excuses of why you haven’t received your loan yet and will just keep asking you for more money.

Final thoughts

In Canada, the banks have dominated the lending market, but with the success of other peer-to-peer services, it’s only a matter of time before social lending becomes mainstream. P2PL is faster, more convenient and in certain situations more affordable, you might as well get a quote since it doesn’t hurt your credit score.

16 Comments

  1. Lynn on April 14, 2015 at 6:19 PM

    It’s about time someone stands up to the banks! The interest rates keep dropping but the bank is holding its credit card rates at 20%, and continues to try and find new ways to raise it beyond that! It’s been a long time since I felt the bank was looking out for me… Not to mention offering up second or third cards and higher limits to people. I’ve personally been phone solicited saying Id be a great candidate for either of these options.. You hope your bank would look out for you but I’m not so certain I’m their best interest… Feeling more like my money is… Just a thought

    • Barry Choi on April 14, 2015 at 7:51 PM

      Lynn,

      Banks definitely could work on their customer service, profits are very important to them. Other industries have adapted to peer-to-peer services, only time will tell if banks make any changes to their policies.

  2. Anum @Current on Currency on April 15, 2015 at 8:48 AM

    This is so interesting! I was just looking into P2PLs yesterday because I came across Lending Club while reading an article. I think a lot of the ones in the Stats are also restricted regionally as well.

    • Barry Choi on April 15, 2015 at 9:18 AM

      Anum,

      There definitely seems to be more options in the U.S. I like how P2P is becoming a real alternative to banks, hopefully it’ll force them to take a look at their business practices.

  3. s. a. on April 17, 2015 at 4:32 PM

    That’s not “real” p2p lending! You still need to be an “Accredited Investor” to invest with them.

    • Barry Choi on April 17, 2015 at 4:37 PM

      S.A. it’s also called marketplace lending. The accredited investors are simply the ones providing the funds for the loans.

  4. Weekend Reading - BBQ Grilling edition - Tawcan on April 20, 2015 at 11:05 PM

    […] at Money We Have wrote about Peer-To-Peer Lending Comes to Canada. I've read lots about P2P lending in the states but haven't discovered any here in Canada. This […]

  5. carmela molle on September 22, 2016 at 9:36 AM

    Hi I’m a woman trying to get a loan for a surgery and I have been trying I paid $200.with borrowers pbp@financial.com and having heard a word and I catch fish was trying to ask for my bank account Im very desperate and in need of surgery due to a brutal crime the surgery is 25.000.and I’m not sleeping trying to find help thank u sincerely carmela

  6. […] generally seem to have some reservations about getting involved in the peer-to-peer (P2P) lending industry, because the industry is yet to be properly regulated. Of course, borrowers don't have problems […]

  7. Olga on March 17, 2018 at 3:07 PM

    Need short term loan for 2 mnths

  8. zyryo on August 16, 2018 at 1:38 PM

    who do i contact for info if i want to invest in p2pl

    • Finance me on August 27, 2018 at 6:08 AM

      Contact the companies directly

  9. zyryo on August 28, 2018 at 3:49 AM

    thanx

  10. John on December 25, 2018 at 9:05 PM

    Excellent writing!
    In my opinion, The future is bright for peer-to-peer lending in Canada. However, the industry is still extremely young and there is a long way to go if peer-to-peer lending expects to have a significant impact on the financial industry.

  11. Br8ttzky4@Gmail gilchrist on March 7, 2019 at 10:13 AM

    Can I get a loan using house as collaterar

    • Barry Choi on March 7, 2019 at 10:42 AM

      You could get a home equity line of credit.

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