Articles
Understand and compare P2P crowdlending in 2021
by APSense News Release AdminWhat are crowdlending online loans?
Crowdlending loans, also called P2P loans are online offered loans between private individuals.
P2P loans are an additional way to finance yourself and, at the same time, to invest and get a return. We explain what this type of loan is, how it works, its characteristics, advantages and disadvantages.
What are P2P loans?
Loans between people, also known as P2P loans, are based on crowdlending and are loans granted through platforms that connect users who need financing with investors who want to make their savings profitable by lending their money. If our goal is to invest in P2P loans it can be useful to compare some of the peer to peer lending platforms that offer this products online.
They are loans granted by platforms that put people looking to invest in contact with people looking for financing. Thus, the borrower gets a loan and the investors get a return (the interest we pay on the loan) by lending us part of the loan.
Therefore, we can point out that what is known as P2P is an alternative source of financing to obtain financing and an attractive way of investing in order to obtain a higher return than that offered by banks.
This financing model is called crowdlending (crowd = crowd, lending = lending) and consists of obtaining capital for the financing of different projects through a large number of private investors, each of whom will contribute a part of the total loan requested.
Although the way of obtaining the money to finance us varies, the conditions and the application process to obtain P2P loans is identical to the banking process.
Main characteristics of P2P loans
P2P loans have virtually identical characteristics and operation to bank personal loans. However, there are some particularities.
1. No peer to peer lending platform requires you to take out any type of linked product. So you can take out financing without having to link up or change banks.
2. Most institutions will charge a management fee of between 0.5% and 15%, which will be the platform's profit.
3. The cost varies according to different factors: the purpose of the credit, the amount chosen and our profile. The better our profile, the less interest we will pay. Generally between 5% and 12% APR.
4. Term it is between 12 months and 10 years.
5. We can obtain between 1,000 euros and up to 50,000 euros depending on the purpose and our profile.
6. The necessary paperwork will be submitted online and you will be asked for the last three payslips, a bank account statement and your ID card.
7. As it is a highly automated process, we will be able to get fast loans in its approval. Although the process could take up to two weeks.
How do I apply for a P2P loan?
The process for applying for a loan between individuals is very similar to applying for an online loan at any bank, although for us it is very similar, the processes carried out by the platform are different.
- Choose the purpose, term and amount of the loan on the website.
- Fill in the online form with your personal and financial details.
- The platform will analyse our profile and assign us a risk level.
- The risk level (together with the amount and purpose) will determine the interest we will pay.
- We are given an offer with the interest rate we will pay.
We read, accept and sign the contract.
The company will publish our loan on their marketplace.
Investors can choose to invest a part of the capital in our project.
After one or two weeks, when we get the total amount of the loan, they will transfer the money to our account.
Is it safe to borrow with crowdlending?
Yes, it does not involve any additional risk than applying for a loan from a bank. Although it is important, as when contracting any type of online product, to make sure that you go to a company regulated by your government when contracting a loan.
Alternatives to P2P to finance our projects
As these loans are so similar to consumer credit, they are the most similar alternative for financing any type of project. We can go both to the bank where we have our income paid in by direct debit and to other entities, as currently many entities do not ask for a link to grant them.
Who lends us the money in P2P loans?
Crowdlending platforms put people looking for loans in contact with people looking to invest.
These private investors will be able to analyse different loan applications and, depending on the profitability they obtain (the interest we will pay for the loan) and the risk involved (financing a trip is not the same as financing a car or a renovation), they will choose whether or not to invest in our project and how much money, as there will never be just one investor for just one loan, there will always be several.
Any natural or legal person over the age of 18 can invest in this type of platform without any problems. Investors, once registered on the platform, will be able to choose the types of projects to invest in according to the level of risk involved and the amount they want to contribute to each project.
The interest that we pay for the loan will be the return that investors will receive in proportion to their contribution.
For individuals, the projects that can be financed are as varied as those that can be obtained with a bank loan.
In addition to dealerships and banks, we can also turn to crowdlending platforms to obtain the necessary financing to make this purchase. They usually have similar conditions to bank loans.
Car sale
With P2P lending we can finance the purchase of a new car.
Financing a renovation
Both for small renovations and for large remodelling projects, we can obtain the necessary capital to redecorate our home. As it is an intangible asset and not a physical one like a car, it is common for them to be a little more expensive than car loans.
Financing higher education
It is usually a common purpose in P2P platforms, although bank loans usually offer very advantageous conditions for this purpose, so it is important to analyse and compare several offers in different entities.
Financing travel
This is usually the most expensive purpose of financing, as it is a "whim", although it is possible to obtain financing for holidays.
Similarly, each platform will indicate the projects for which you will be able to obtain financing, as not all platforms will allow financing for all purposes.
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Created on Apr 25th 2021 13:20. Viewed 206 times.
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