John Harun Mwau ,How Loans Get Upside Down,
You get an upside down loan when the item loses value faster than the loan balance decreases. For example, a brand new car might cost $25,000. A few years later it might only be worth $15,000. If you owe more than $15,000 on the loan, you have an upside down loan. You'll have to write a check to sell the thing, or keep paying for it after it's worthless.
To avoid an upside down loan, you need to pay off the loan (or have it amortize) faster than the item loses value. For auto loans, you generally want loans that last less than 5 years. Longer terms can help keep monthly payments low, but you risk having an upside down loan.
Managing Upside Down Loans
If you find yourself with an upside down loan you need to be careful. You should decide if you need to get out from under it (at a cost) or if you're going to let it ride. You should make extra payments if possible. For auto loans, you should investigate gap insurance to manage your risk.
Peer to peer lending, or person to person lending, allows you to skip the bank and borrow from individuals. You can borrow from complete strangers or just use peer to peer lending services to structure loans between friends and family. This page covers how peer to peer lending works, the major services, and how you can take advantage of it.
Peer to Peer Lending Cuts Out the Bank
When you participate in peer to peer lending, you're cutting the bank out of the equation (and replacing it with your P2P service). Banks have their place in the world, but sometimes your best bet is to borrow elsewhere. Peer to peer lending gives you another option for secured and unsecured loans.
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