The collaborative economy has revolutionized our society in recent years, names like Airbnb or Booking are already part of our daily vocabulary. Within this context, peer to peer or p2p loans arises, one of the main alternatives to traditional banking that are gaining strength in recent years.
P2P loans are loans that are granted through online platforms
That link investors with users who need financing. Thus, p2p lending platforms allow you to apply for loans online or invest without having to use a bank as an intermediary.
In them, individuals looking for new ways to obtain a return for their money, as well as those users who need immediate liquidity in case of any unforeseen event, have found the perfect formula to access more advantageous products.
Traditionally, the financial market was controlled by and for a small sector of the population. Peer to peer loans has succeeded in democratizing investment and financing by promoting a more horizontal model, where anyone with savings can invest and make a return on their money, and where an individual with regular income can access financing well to give a boost to your business, well to deal with any economic eventuality.
What is a peer to peer lending?
It is an incontestable fact that the current economic and financial crisis has negatively affected the savings of families and the possibilities of small and medium enterprises. Fortunately, this has led to the development of new alternatives such as, for example, fast online credit companies, such as Good Credit, or crowdlending.
Crowdlending (crowd, means multitude and lending, lending) consists of financing companies, projects or individuals by a large and diverse group of people, rather than by a single investor or a limited number of investors. This new form of financing consists of the contribution of a loan, financed with private capital, to a project or person.
This loan must be repaid in the payments that are established, together with an interest rate agreed between the interested parties. Peer to peer lending would be framed within this modality.
The idea is quite simple, since it is inspired by the traditional banking model, but introducing the advantages of using the internet. That is, traditionally, if a person enters an amount of money in a bank, either in a checking account or in a deposit, he receives a certain return on interest. On the other hand, if you request a loan from a bank, you will receive the cash for which you will have to pay commissions and interest previously established in the contract.
In the case of peer to peer lending, the intermediary ceases to be a traditional bank or financial institution to be replaced by an online platform whose purpose is to connect people who have a saved amount of money who want to invest with people who need a loan. On the one hand, the investor will receive a higher interest rate than that offered by a bank and, on the other, the borrower will obtain a loan at a lower rate than what banks usually offer.
In addition, these platforms are responsible for assessing the risks of users requesting the credit, as well as claiming debts in cases of default. Also, to reduce the risk of investors, they usually diversify the money of the lenders among several financing applicants, so that the loan payment does not fall solely on a single borrower.
Who invests in p2p loans?
Any natural or legal person over 18 years of age can invest in this type of platform. Investors, once registered, can choose the types of projects to deposit their money, according to the level of risk involved and the amount they decide to contribute.
The interest that the loan applicant pays for the credit will be the profitability that investors will receive in proportion to their contribution.
What are p2p loans used in Spain?
The p2p loans have their origin in the United States and the United Kingdom, authentic referents of crowdlending in recent years. The Good Finance market, a pioneer in this type of financing, has established the legal and formal basis for the implementation and development of this alternative market.
The first p2p loan platforms in Spain emerged to cover the financing gap that arose in the market following the economic crisis. Companies could not access the usual credit channels, as banks had drastically halted the granting of loans. In turn, investors were increasingly struggling to obtain an attractive return on their money. In this context, and with the experience of the Good Finance market as a reference, several online financial platforms began to consolidate as an alternative to traditional banks.
In general, the Spanish user usually uses these types of loans for the same purpose for which consumer loans are requested. Here are some examples of cases for which these types of credits can be allocated:
Financing the purchase of a car: in addition to the dealership itself or the traditional financial entities, crowdlending platforms can be a good ally when requesting a loan to make this purchase.
Addressing a home reform: the amount of money that can be requested in a peer to peer loan ranges between 2,000 and 50,000 euros, so this product is very interesting both to finance small reforms and major remodeling projects.
Gather debts: not all crowdlending platforms offer this possibility, but you can get a high amount of credit without collateral to unify all our existing loans in one and, thus, cancel the rest.
Grant us those deserved vacations: being a purpose that does not involve the acquisition of a good or the achievement of a specific project, it is usually more difficult to get investors for this type of recreational purposes. However, there are peer to peer lending platforms that offer solutions to those families who need an injection of liquidity to enjoy Christmas or summer vacations, especially if they have demonstrated recurring monthly income and a healthy financial situation, without other types of outstanding debts.