Recently, a new type of loan – a loan from a private individual – has started to make waves in the country as well. It is by no means a loan that you take from any stranger, but people-to-person loans are provided through the respective loan platforms, which act as a bridge between the lender and the borrower. However, how exactly do such loans work and what should be kept in mind?
What is a loan from an individual?
Although bank’s range of loan products does not include people-to-people loans, we would like to clarify a little bit about what this loan product is more precisely. Private loans, also known as P2P loans, co-financing loans or people-to-people loans, are, as the name implies, loans where the lender is not a bank or lending institution, but another individual. Of course, some companies can be borrowers, but the whole idea is that through a certain loan platform, individuals can invest their money by financing loan applications and earning money from interest, and on the other hand, people can borrow from other individuals on flexible terms.
The use of co-financing platforms has become popular, especially among investors, as investing in loan applications is much easier than starting to trade on a stock exchange or foreign exchange market, for example. At the same time, it is possible to quickly obtain financing for your loan application through co-financing, and sometimes it may happen that a person who would not otherwise receive a bank loan also receives a loan. Broadly speaking, a loan from an individual is the same as any other loan product – in order to get a loan, you have to identify yourself, prove your income, and the loan has an interest rate similar to ordinary loan interest. However, if you are looking for an opportunity to start investing or earn a little extra money,
Pros and cons of lending to an individual
People-to-people loans have gained popularity at an insane rate, but you may be wondering why a loan is still beneficial for an individual and what the disadvantages are. The main reason why many borrowers prefer co-financing is flexibility. It may be the case that a loan applicant who would not otherwise be able to obtain a loan from a bank on suitable terms may obtain a loan with a suitable interest rate and payment period through co-financing. This is due to the fact that the loan application is “brought together” in the interest of the investors – the loan applicant sets out the conditions that would suit him and then the application is sent to investors who might be interested. If the terms of the loan application are suitable for the investor, he can choose the amount to which he agrees to finance the application. If enough investors have invested in the application, the application will be funded.
Such a system can open up the possibility of obtaining a loan even if you cannot get a loan elsewhere, and this is the main reason why a loan from a private individual is so popular. However, this shiny coin also has the other side. A co-financing platform is not a place for those who need a loan very quickly, as a loan application may not receive funding quickly and may be put on hold for a week. The same happens if the conditions requested by the applicant do not match the wishes of any investor. This means that it may again be much more difficult to obtain a loan through co-financing. If you are looking for an opportunity to get extra money quickly, then bank small loan is a much faster and more secure way to borrow.
It is more convenient to borrow from a bank than from an individual
As mentioned earlier, a loan from an individual is not an option for those who want to borrow money conveniently and quickly: a loan application can be delayed for a very long time and may not get financed. If you’re looking for a safe and fast way to get a little extra money and you value professional service, bank has it all and more. With us, you will not leave your loan application to fate, but you will receive an answer within minutes.