Loans with A Twist: Peer-to-Peer

If you’re having trouble getting a student loan, you might be tempted to go through a peer-to-peer loan site. With phrases like “finance education the easy, affordable way!” and “get student loans from people who believe in you,” sites like fynanz.com and greennote.com make offers from private lenders that seem too good to be true.

While traditional government student loans have mandated dollar limits that fall short of real-world education expenses, these college lending sites boast no dollar limits. The downside could be a higher interest rate. If you’re considering using one of these sites, take the following steps before you commit:

• Know your credit score. Like many private lenders, the interest rate you may be offered will vary based on your credit score.
• Check to make sure the loan has a fixed interest rate. That means the rate won’t change throughout the life of the loan.
• Know when the loan payments will become due. Some loans may require you to make payments while you’re still in school, which may be hard for you to pay. Other loans may not become due until six months after you graduate, which should give you time to secure a job and a paycheck.
• Know the consequences of missing payments. If you’re unable to repay the loan on time, your account could be turned over to a collection agency, which will ding your credit score and make it harder for you to get credit in the future.