The peer-to-peer loan (P2P credit for short, sometimes referred to as C2C loan) refers to a loan that is granted by a private individual to another private individual. The P2P loan allows individuals to borrow without turning on a bank. Other forms of credit that are confusingly similar, but mean something different, are B2B (business-to-business) and B2G (business-to-government). We are now opting for Crowdestor peer to peer lending .
Peer-to-peer loans are loans made by private individuals to other individuals. This special form of credit is offered in Germany almost exclusively by special Internet platforms. It is also necessary to engage a bank in the case of peer-to-peer loans, as the lending business in Germany is subject to a license. Without a bank that pays the actual loan, so it is not.
Benefits of Peer-to-Peer Credit
As an alternative to the bank, there are various platforms on the Internet such as Smava, Lendico, and Auxmoney, which act as intermediaries of P2P loans. Some need money for their projects; others are looking for ways to invest their money. This means that, on the one hand, certain costs that are typical of a bank are eliminated. On the other hand, there are no complicated contracts as they are concluded between banks and private individuals. Overall, this has a favorable effect on the annual percentage rate. From investors, P2P loans are exciting opportunities to make well-paid investments. By investing in various projects, private investors spread the risk and can build a portfolio that regularly earns interest.
For those involved in the P2P loans, there are other benefits that the settlement on the Internet brings with it. First, vendors protect the privacy of those involved so that personal and financial details remain hidden. This applies insofar as it is not necessary for the lending business. Donors and borrowers act through the platform via a pseudonym, so that the anonymity is maintained. Another advantage is that it works from home and the platforms are open 24/7.
Borrowing by P2P is recommended, especially for groups of people who usually have bad chances to get a bank loan. Even if bad credit exists, P2P loans can be forgiven. Also, if a student is looking for a loan, P2P platforms can be a good solution. Self-employed people who want to fulfill their dream of having their own office often find an alternative on P2P platforms if the bank has already said no.
Disadvantages of peer-to-peer loans
There are certain disadvantages to peer-to-peer credit as well. Thus, it is not easy to assess the risk with anonymous loans. In contrast, there are the intermediaries who carry out a risk assessment and quantify the default risk accordingly. Anyone who chooses to take a P2P loan as a borrower or lender should always look at the legal basis to avoid unpleasant surprises with massive financial consequences. Experts regularly review the online credit marketplaces in the country. It gives tips and hints for choosing the right provider.