When you are looking for personal loans to finance your different projects, the most common thing is to go to your bank where you have your payroll and your checking accounts to request the financing you need. However, in recent years other forms of financing have appeared in the hands of private equity entities that are presented as attractive alternatives to get the credit you need.
Thanks to the evolution of fintech (the technology applied to the financial sector) and the collaborative economy, the P2P loan platforms, or loans among people, are born, where several investors decide to finance the projects of an individual or a company. This new form of financing has gained strength in recent years.According to a study by the University of Cambridge, in Spain this type of financing has been growing since 2012 by 152%.
How P2P platforms work
These online platforms connect people seeking financing with investors willing to give it in exchange for a return (interest on the loan). Crowdlending platforms perform credit analyzes to borrowers to determine their solvency level and, according to these analyzes, assign them to a level of risk.This level of risk will determine the interest: the higher the interest, the more interest will be paid since investors will want to obtain more profitability by assuming a higher risk.
Once the project to be funded is approved and assigned a level of risk, it is published in a “marketplace” where different investors can finance a part of the project (from $ 20 to $ 3,000) according to the level of risk, profitability, the project that the borrower wants to finance and several other factors. When the project has been fully funded, the P2P loan platform transfers the funds to the borrower who will be returning the loan in monthly installments.
New form of financing
There are many insecurities that arise among potential borrowers. Therefore, if you are thinking of obtaining financing through these platforms, you must take into account these factors:
- That they are in the process of approval by the OneSpecial Bank and the CNMV. They are not yet approved since the new Crowdlending Law in Spain was approved in April last year.
- Its transparency, that is to say, that all commissions and interests that will apply to the requested credit appear, in addition to all the contracting conditions.
- The amount of loans they have granted. This will give us an idea of how many people have already relied on this type of financing and the economic strength it has.
Taking these factors into account, you will be able to go to crowdlending platforms knowing that you are facing a legitimate company that you can trust both to get funding and even to encourage you to invest in the projects of other borrowers.