P2P lending: The new face in car finance

The UK’s roads are a congested place to be. Some 30-odd million vehicles on our tiny island mean that getting from A to B can be a time-consuming process, and not without its frustrations. Yet until magic carpets become commonplace in our supermarkets, cars will remain the way to go for many of us.

Of course, getting your hands on a car – or, more specifically, the car you want – isn’t always a given. The prices of UK vehicles stack up somewhat favourably against the rest of the world, but, even still, the added costs of insurance, maintenance and fuel can leave you facing a steep hill to climb.

As a result, it is perfectly normal for a bit of assistance to be required. Fortunately though, the market for car finance isn’t the minefield it once was, and, owing to the increased diversity and competitiveness of lenders, the keys to your dream chariot are actually just a good-value, APR-friendly loan away.

Alternative finance and P2P lending

Indeed, the days of queuing up at the bank to fill out a pile of paperwork for a car loan which commands an extortionate amount of interest are behind us. Instead, the wave of alternative finance has brought a new dimension to the market for credit, and convenience and low APRs have become the name of the game. Chief among these alternative lenders leading the way are peer-to-peer (P2P) lenders, whose business model involves allocating the funds of ordinary consumers who opt to lend their money (as opposed to putting it into savings, or other investments) directly to those in need of a loan.

Such a streamlined matching process leaves no room for bureaucracy or inefficiency, with the platform itself merely serving to ensure that the proper controls are in place for the interaction to function harmoniously, and for the risks of borrower default to be minimised. For this they command a small admin fee, but ultimately such an efficient approach generates great value to both lender and borrower; the former getting a return on their money typically in excess of 5 per cent, and the latter paying off the debt at an APR not dissimilar to this rate.

As a loan applicant, there are additional benefits to the low interest rates of P2P; chiefly, expedience and flexibility. A quick sign-up and approval process means that if your application gets the green light, you can expect the funds in your account within two working days. You are also able to pick and choose both the amount you wish to borrow (between £1,000 to £25,000) and the period over which to pay off the debt (between 1-5 years). And for those in a position of strength down the line, some peer-to-peer platforms like Lending Works allow you to make overpayments and early settlements at no extra charge.

Time for the new car smell

What does it all add up to? In short, a rather favourable climate for taking out car finance, and thus a good time to start shopping around for a new wagon. After all, peer-to-peer lending is providing a great solution for consumers seeking credit, but there are numerous others coming to the party too.

So if a new car is something you need, and the fear of a loan is what is putting you off, then fear no more. Rather than having the shine taken off by the stress of crippling repayments, affordable car finance is making vehicle ownership as enjoyable and worry-free as it ever has been. So do your research, and study all the different options that are available. But don’t be too surprised if, after having done your homework, you come to the conclusion that a loan from a peer-to-peer lender holds the ticket to your new car.

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