Peer-to-peer (P2P) lending can be an incredibly useful tool for both companies and individuals to raise money. However, like with any other form of finance, bad credit can be a spanner in the works. With a poor credit rating, securing your ideal loan can be challenging, and the terms aren’t always favourable. While this can often be enough to sink any attempts to obtain most loans, there are plenty of options available for P2P lending for bad credit.

In this article, we will discuss your options for P2P lending for bad credit, how you can obtain them, and ensure you have the information necessary to make the best decision. Let’s get started.

What is peer-to-peer lending with bad credit?

Peer-to-peer lending for bad credit is a subcategory of P2P lending specifically for people with bad credit scores. Instead of relying on established financial institutions for borrowing needs, P2P lending is between one individual to another. This has considerable benefits, namely that borrowers can find much more flexible loan agreements, securing finance they otherwise would never be able to. However, this increased freedom carries increased risk; as upstanding institutions do not oversee the agreement, it increases the risk of both borrowers and lenders entering into bad deals. To mitigate this risk, you could instead use a P2P lending intermediary.

If you’d prefer an institution to go through, which would be a safer idea, then you could rely on one of the many P2P intermediaries. They act essentially as a hub, allowing lenders and borrowers to find the most appropriate loan agreement with ease. Going through an intermediary is also considerably safer, allowing users to scrutinise both lenders and borrowers, and have some other safety measures to fall back on. As such, these intermediaries are the most used method for P2P finance.

How does peer-to-peer lending for bad credit work?

Before you get started with P2P credit, it can be useful to know how the process works. Put simply, an intermediary will bring borrowers and lenders together to facilitate an agreement. They act as middlemen, taking into account what a borrower is looking for and finding a suitable lender for them. Their job has earned them the nickname “money cupids”, as they essentially match-make prospective borrowers and lenders.

From a borrower’s perspective, once you have given your chosen intermediary the specifics of your desired loan, they will notify you of the available loans that match your needs. You will then have to decide between your options, or whether to take any at all. Your options will, of course, be much more plentiful and flexible if you have a high credit rating. You can expect sizable loans with low-interest payments. While a bad credit rating won’t preclude you from decent options, you likely won’t have access to as favourable terms. Bad credit will mean higher interest rates, and likely smaller loans, given the higher risk presented by such borrowers.

Lenders also have a choice in who they lend to. If they’d prefer a reliable return, they can opt to lend only to low-risk borrowers. Conversely, they can lend to higher-risk borrowers for a comparatively high return. This assures that for prospective borrowers with bad credit, P2P lending will turn up an opportunity given enough time.

How to obtain a peer-to-peer loan with bad credit

If you want to secure a P2P loan, but you have a poor credit rating, you’ll need to provide your potential lender with a few documents. Ensure you have the following close at hand for a streamlined application:

  • Identification – The first set of documents you’ll need to provide is identification. You’ll need a few information points, such as your name, address, and contact details. Providing this information can be quite compromising when dealing with private individuals, which is one of the reasons why so many people choose to go through an intermediary. P2P platforms will ensure your data is kept safe and secure; they won’t even disclose it to your lender.
  • Proof of income – Next, you’ll need to provide some proof of income. This is to determine how much of a risk you are, and whether you could repay the loan at all. You’ll need to declare your source of income, and provide some evidence of it.
  • Credit rating – While not the be-all and end-all, you will still need to provide your credit rating. Bad credit isn’t likely to make or break your application, but an absurdly low credit rating may make your options especially slim.
  • Purpose of the loan – Declaring the reason for your loan is the final part of the application. Not every P2P lending platform will require this information, though some like to provide their lenders with this information to perform their “matchmaking” role better. It isn’t likely to affect your application much, though it may determine the loans that your intermediary puts before you.

What types of loans can be obtained through peer-to-peer finance?

One of the advantages of P2P lending is the variety of loans that can be obtained. You can acquire almost anything for almost any reason, from property development to student loans. Here are some of the most used loans:

  • Small business loans – One of the most popular uses for P2P lending is to raise capital for small businesses. The flexibility provided by P2P lending assures small businesses will find an agreement that works for them.
  • Personal loans – A personal loan is ideal for individuals who need a quick injection of cash. A personal loan can be taken out for any reason, often with flexible terms. Many P2P lenders are willing to provide personal loans. As such, you’re sure to find something, regardless of the reason you need the money.
  • Debt consolidation loans – If you need some breathing room in order to get your debt under control, then a debt consolidation loan could be the best thing for you. They tend to come with fairly low interest rates too, which can further help you get your financial situation under control.


P2P lending can be an excellent solution for your financial needs, whether you have a bad credit rating or otherwise. P2P platforms can bring a range of options before you, allowing you to choose the best loan for your situation.

Despite the convenience of P2P lending, you should still do your due diligence. You should compare loans across several platforms to ensure you are getting the best deal. In addition to the loan and its repayment terms, you should look for any additional fees and costs to find the best value loan.