Loans between people, also known as P2P loans, or peer to peer loans, are based on crowd lending and are credits that are granted through platforms that connect users who need financing with investors who want to make their savings profitable by lending their money. Therefore, we can point out that those known as P2P are an alternative source of financing to obtain financing and an attractive way of investing to achieve a higher return than that offered by banks.
This financing model is called crowd lending and consists of obtaining the capital for the financing of different projects through a large number of private investors, each of whom will contribute a portion of the total loan requested. It is an innovative model that allows financing without having to go to banks or investors to achieve profitability through a new asset class.
Who can apply for a loan through Peer-to-Peer?
There are P2P loan platforms in Germany namely German Fintech VAIDOO, specialized in financing to individuals and financing to companies or SMEs. It is best to compare several platforms to choose the one that best suits our profile.
In the case of companies, it is a good way to diversify sources of financing and obtain financing for more extravagant projects.
In the case of people, it is a good way to get very cheap loans if we have a good profile since the interest will depend on our profile.
Characteristics of P2P loans
P2P loans have characteristics and operation that are almost identical to personal bank loans. Although there are some peculiarities
Linking: no peer to peer loan platform requires the hiring of any type of linked product. So we can hire financing without having to link or change banks.
Commissions: generally most entities will charge a management fee that ranges between 0.5% and 15% and will be the benefit of the platform.
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.
The term: is similar to consumer loans according to the purpose. It is generally between 12 months and 10 years.
The amount: like the term, it is similar to that offered by personal bank loans. We can get between 1,000 euros and up to 50,000 euros depending on the purpose and our profile.
The speed: being a much automated process we can get fast credits in its approval. However, until you get the money, the time can be extended up to two weeks.
100% online application: both the delivery of the documentation and the signing of the contract are done completely online.
The application process to get P2P financing
The process to request a loan between individuals is very similar to requesting 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 on the loan website
- Fill in the online form with our personal and financial data
- The platform will analyze our profile and assign us a level of risk
- The level of risk (along with the amount and purpose) will determine the interest we will pay
- They give us an offer with the interest we will pay
- We read, accept and sign the contract
- The company will publish our loan in its marketplace
- Investors may choose to invest a portion of the capital in our project
- After one or two weeks, when we get the total credit money, we will transfer the money to our account
There is a small limitation and if we have not obtained at least 80% of the amount of credit we need within two weeks, our project will be considered as having no interest for investors and it could happen that they refused our loan. Likewise, this possibility has rarely been realized.