What Is a Peer-to-Peer Loan, and How Can It Help You in Divorce?

Divorce is expensive, but there are ways you can help shoulder the costs. When it's time to end a marriage, there's nothing that should keep you trapped – including your financial situation – and a peer-to-peer loan may be an option.

What is a peer-to-peer loan?

A peer-to-peer loan, sometimes called a P2P loan or P2P lending, is a type of personal loan extended by one person or group to a person in need. This type of loan is often used to help someone through a difficult time, such as a divorce. Peer-to-peer loans are different from traditional loans because they are not given by a financial institution.

One draw of these loans is that they’re often easier to get than traditional loans. What’s more, timely repayment can help you repair a poor credit score.

How can I find the best peer-to-peer loan?

Online peer lending platforms are common. Performing an internet search will quickly lead you to myriad options. Some are far better than others, so read the terms and conditions carefully. Make sure you understand how much money must be paid back and when the loan amount must be repaid.

Factors to look at when evaluating P2P lending platforms include the following:


The APR, or annual percentage rate, is the percentage of the loan that will be charged in interest each year. This number can vary quite a bit, so it's important to shop around for the best deal. A good APR is anything under 10%, while an undesirable APR is anything over 15%.

Notably, P2P loans tend to have lower interest rates, whereas other types of loans – including personal loans and credit card credit – have higher interest rates.

Loan terms

A good loan term has a lower interest rate and lasts a shorter duration. A bad loan term, on the other hand, has a high interest rate and lasts for a longer amount of time. 

Origination fees

One cost to be aware of is the loan origination fee – an initial cost some lenders charge to process the loan. A good loan origination fee is one that is low and reasonable – ideally zero. A bad loan origination fee is one that is high and unfair.

Prepayment penalties

Some lenders charge a fee if you pay off the loan earlier than the agreed-upon terms. The good news is that most P2P lenders do not charge a prepayment penalty. The bad news is that there are a few lenders who do. So, it's important to read the fine print, including the repayment plan, before you sign up for a loan.

Minimum credit score

Lenders look at an applicant’s credit score to calculate their own risk. A good credit score suggests creditworthiness – the person has a good track record of paying back loans on time. A low credit score suggests the person may not pay back the cash. According to the FICO credit score system, anything above 670 is a “good” score. Anything below 600 is a “bad” score. If your score is low, it can be harder to get a loan – and if you get one, you’re more likely to have a high interest rate.


Loan collateral is a type of security a borrower offers to a lender in order to secure a loan. It may be in the form of assets such as property or vehicles. A guarantor – someone who agrees to pay the debt if the borrower cannot – may also qualify as collateral. 

Loan disbursement

A loan disbursement is when the lender sends the money to the borrower. When a loan is disbursed in a good way, the borrower receives the money in a timely manner. This can help them through a difficult time, such as a divorce. The money can be used to pay for attorney fees, court costs, and other expenses associated with the divorce. When a loan is disbursed in a bad way, the borrower may not receive the money they need on time.

Pros and cons of P2P loans

On the plus side, a P2P loan can be a fast and easy way to get money without having to go through a bank. This can be especially helpful if you need to pay for legal fees or other expenses associated with the divorce. For people with bad credit, the (typically) lower interest rate is also attractive.

However, there are some potential downsides to consider before taking out a P2P loan. First, these loans sometimes cost more than other options. Second, it's important to clearly understand the loan terms before signing for it, as some lenders have hidden fees or penalties. 

Finally, it's important to note that loans in the peer lending market are often unsecured debt, but they are sometimes secured. If you fail to pay a secured loan back according to the terms, you could lose your home or other assets.

Learn about Hello Divorce’s flat-rate divorce financial planning service here.

How can I apply for a peer-to-peer loan?

To start the process, you'll need to provide information about yourself and your finances to the peer lender you are considering. This includes your name, address, Social Security number, and income information. You must also provide details about your loan request, including the requested loan size and what you plan to use it for.

Once you’ve gathered this information, you can begin the application process. Often, this can be done online. Remember to review the terms and conditions of each loan before you choose one, as different lenders may offer different interest rates and monthly payment terms.

Hello Divorce cares about your financial health

Hello Divorce was created with the goal of making divorce more affordable for everyone. Our clients spend thousands of dollars less on their divorces than spouses who lawyer up the traditional way – really. Check out our plans to find one that works for your needs.

Divorce Content Specialist & Lawyer
Divorce Strategy, Divorce Process, Legal Insights

Bryan is a non-practicing lawyer, HR consultant, and legal content writer. With nearly 20 years of experience in the legal field, he has a deep understanding of family and employment laws. His goal is to provide readers with clear and accessible information about the law, and to help people succeed by providing them with the knowledge and tools they need to navigate the legal landscape. Bryan lives in Orlando, Florida.