P2P Loans: the new investment that replaces the deposits?

P2P ( Peer to Peer) loans are the new financial products that interest two types of clients: those that need a loan and those that seek an investment for their savings (here they invest in debt of others). They are managed through virtual platforms, which act as a “showcase”. That is, users who need money explain their case on the web from anonymity (for example, I need to finance a new company or pay for a reform in the kitchen), so that investors can choose from a list of cases in which be able to invest.

The experience for the one who asks for money

To have access to one of these loans, the interested party must explain why he wants the money and provide information about his current financial situation (if he has a stable income, if he is in ASNEF, …). These data and those relating to your credit (amount, term and interest), will be reflected on the website of the company P2P for investors to see their case and decide if they want to invest in it.

The interest P2P loans charge an interest between 5% and 15%, that is, they can cost less than if we ask a bank for credit and they are definitely cheaper than going to private capital (quick loans can exceed 2,000% APR ).

The amount They allow to ask for credits between 600 and 100,000 euros, although the minimums and maximums vary according to the company. Thus, Lendico is the one that allows more money to ask individuals, offers between 600 and 25,000 euros, Zank between 1,000 and 10,000 euros and Comunitae between 600 and 8,000 euros. Arboribus, which only lends to companies, grants loans between 10,000 and 100,000 euros.

The term. The client can return the money in a maximum period that according to the company will be 48 months (such as Zank or Comunitae) or up to 5 years (as in Arboribus or Lendico).

The answer When an interested party asks for money, he quickly obtains an answer as to whether his credit is viable on that website or not. If it is viable, it is uploaded to the web along with the other cases and it will still take a few days, at most two weeks, to know if there are investors interested in lending you money.

Finally, in case of default, they usually notify in a friendly way and sometimes it is possible to manage a flexible payment schedule before entering into a judicial process.

The experience for the investor

The first thing to know is that investors distribute their investment among the loans of several people, that is, it is not that a single investor fully funds the credit of a person who has requested it. It is not a one to one. This reduces the investor’s risk that the client will not pay him.
The administrators of the P2P platform will be responsible, as a general rule, to assess the risk of each loan application and, once checked, will publish each project on the website. From that moment, people who wish to invest can consult all available loans, their characteristics and the profitability they can get.

On the other hand, if we talk about loans directly from person to person, without going through P2P platforms, it is the lenders themselves who will have to request all the information and evaluate the risk.

Is it a safe investment?

P2P platforms offer a series of securities. As a general rule, before publishing a loan on their website, they carry out checks to ensure that the project is viable and that the person requesting the loan can pay for it and is solvent. Basically, it is checked if the person has regular income (payroll, pension, etc.) and if he is registered in a list of defaulters, such as ASNEF. It is worth mentioning that this type of websites usually reject more than 95% of the requests for credit they receive, to demonstrate that there really is a “screen”.

Once the borrower’s situation has been verified and the project evaluated, a rating is given to each loan, according to the risk it has. The greater the risk, the greater the possible profitability for the investor and the interest rate of the loan. That is, the investor decides where to invest knowing very well the degree of risk that runs at each moment, so you can risk more to try to win more or riskless but win a little less.

To consider

• If the loan is made between individuals, without going through a P2P platform, we must study the risk well and be aware of the possible deception. That is why it is recommended never to give money in advance to anyone, even less if we are the ones who request the loan.

• Since the interested party asks for a loan until their money is actually in their bank account can pass a couple of weeks, so if we require the money in the next few hours it is best to getting auto title loan.