It is no longer just banks that can issue loans. Private individuals can also become lenders via special loan platforms on the Internet and thus help other people for whom a loan from the bank is not a good option. The special feature for the lender is the high returns: Depending on the project, far more than 7% interest can be earned here. No wonder that payday loans have been gaining popularity in Germany for years.
Lenders are on the Internet
These portals work according to a simple principle: they bring investors and loan seekers together and usually collect a small fraction of the investment as wages for their service. The amount of the desired loan is very different. Sometimes the providers allow inquiries from a few hundred dollars, others start from 1,000 dollars. The special thing about these platforms is that the individual loans do not necessarily have to be financed by a single person, the experts at the portal KreditBeanhaben.online explain. It is rather typical for an investor that only small amounts are invested per project, for example 25 dollars each.
If you want to invest 250 dollars, you could split the sum between 10 different loans, regardless of the amount requested. A loan project usually only starts when sufficient donors have been found. From this moment on you make money with your investment. Depending on how risky a project was rated by the credit intermediary, the interest falls. It is good practice that the portals work with a bank through which all transfers run. This has advantages for all parties, since disruptions are noticed in good time. For example, if a debtor misses a payment, it doesn’t always have to be malicious, and the problem can be fixed quickly.
payday loans are not risk-free
Given the persistently low interest rates that private investors get from banks, a payday loan for donors seems particularly appealing. It is understandable if you can earn more than 7% return on your money instead of 0.5%. But before you start thinking about investing in private loans, you should be aware of the associated risk: if a creditor is insolvent, in the worst case you can lose the amount invested. This rarely happens, but there is a possibility. Most of the time, providers who broker loans between two private individuals try to avoid such defaults. For example, many platforms work together with a collection service that takes care of the problem in an emergency. Nevertheless, there are situations in which a collection agency no longer has a good chance.
If, for example, the debtor is permanently insolvent and has filed for bankruptcy, it will be difficult to fully recover the amount owed. Some providers have implemented further measures to identify problematic cases at an early stage. As already mentioned, it can be monitored whether the debtor makes his installment payments regularly. If he does not pay for several months in a row, the provider cancels the loan and arranges for the repayment of the outstanding amount. So you don’t get any interest on the outstanding amount, but you don’t lose the invested capital. However, these extreme cases are the exception and increasingly occur in loan projects that were classified as particularly risky. If you stick to borrowers who have been rated as reliable and have good collateral to offer, the chance of a default is very slim. Depending on the platform, the risks are divided into more or less fine gradations. In any case, you can see the risk involved in each individual loan application before you commit, and decide accordingly.
Private loans as an opportunity for borrowers
Whenever a bank is not a lender, it can be a good option to apply for a private loan. For example, what is rather uncommon at German banks are low-cost loans that you or someone else uses to make a wish come true. A simple example: Christmas is just around the corner and the children express costly wishes at the last minute, which cannot be funded spontaneously. Borrowing money from a friend at short notice is probably impossible before Christmas, since everyone has to buy gifts themselves. With a small loan that can be paid off in a short time, you could create the necessary financial freedom. But at the house bank this project is likely to be closed – with a payday loan, on the other hand, you have to deal with lenders who can understand the situation emotionally and are happy to help out.
With good creditworthiness and a suitable hedge like a car, the loan interest is tame. However, private loans are also good if the credit rating is poor, when most banks already refuse. Although credit intermediaries on the Internet check you closely in terms of finance and solvency, instead of rejecting it, you are usually only assigned a higher risk level. The private donors can then decide for themselves whether they want to take the opportunity. The credit platforms are also a good opportunity for self-employed and start-ups. Regardless of their credit rating, they often find it difficult to get a loan from a bank. On the other hand, online you can present your idea to a wide audience and reach more potential lenders.