What are Peer-to-Peer Loans and how do they work?

 

If you need a loan, you can go to a bank, non-banking company or turn to loved ones. However, you can also try your luck with a P2P loan, which is deposited by specific people – investors who use their P2P platform to value their savings. Is everything about P2P loans as idyllic as it looks in commercials, or do they have the pitfalls to know about?

In order for such a loan to be given a specific framework and rules, P2P platforms have been created that connect people who lack money with those who dwell. Both groups can help each other – successful applicants get a loan and investors evaluate the deposited funds through interest. The revenue that P2P platforms offer investors is quite interesting and surpasses a number of traditional ways of investing, albeit at some risk.

How P2P loans work?

How P2P loans work?

The principle of applying for a P2P loan, refinancing or consolidation is quite simple and the process is generally virtual. In addition to personal information, the loan applicant fills in the form what he / she would ideally need, how long he / she wants to repay it, and how high the interest would be. His demand, which in some cases can accompany a personal story in which he describes what he plans to use the money, posted on the P2P platform site and then watches how investors put on his loan.

TIP! Need a financial injection and want to know what your options are? Check out our great loan overview.

To get the money, investors must first deposit on your loan. Usually this is done in a similar way as an internet auction, where investors themselves decide to whom they lend their money. The requested amount can then be covered by one investor, or it is composed of more people, depending on the rules of a particular P2P service. Nor is it uniform in the form of “negotiating” the amount of interest. Some platforms allow it to be agreed between the potential debtor and the creditor, while others calculate it on the basis of the information provided by the applicant.

Everything is treated in the contract

Everything is treated in the contract

To avoid lending between people on unclear conditions and without rules, the P2P platform must cover the whole transaction legally. Therefore, he / she will write a contract between the borrower and the lender and ensure that the money arrives where they are. It also ensures that the debtor regularly repays his obligation and, if in default, tries to resolve the situation. This is one of the reasons why P2P platforms check applicants’ creditworthiness in a similar way as banks and the notion that loans in this area are “on a good word” basis are quite distorted.

The loan approval shall be preceded by a thorough examination by the applicant.

The rules for loan application approval are slightly looser in P2P platforms compared to bank houses, so even a person who has not been lent by a bank can reach a loan, but it certainly does not mean that everyone can get it. Reasons for rejection may or may not be due to insufficient income, troubled financial history, or ongoing execution. However, each application is assessed on a case-by-case basis and the potential risk is also borne by investors. Therefore, people who would be rejected by the bank without hesitation could succeed in certain circumstances.

What do modern loans for private and professional purposes look like?

From installment, annuity and mortgage to repayment loans: there are numerous ways to adapt the mortgage to individual needs. Finding yourself right in the variety of loans is not always easy.

Whether in private or professional matters: growth costs. For companies, these are mostly resources, plants and machines, as well as locations that mean high costs. In private, there is often a change in the living situation in the form of building or buying a house, which is realized with a loan. Modern and flexible solutions for financing at suitable conditions are therefore more in demand than ever.

 

Digression: Development of the amount of lending from 2014 to 2017

According to the banking association, the total amount of loans granted to private individuals as well as to companies and self-employed has risen continuously in recent years. From 2014 to 2017, the total amount of private loans rose from USD 1,078.6 billion to USD 1,192.3 billion. For companies and the self-employed, the amount rose in the same period from 1,291.6 billion to 1,403.1 billion dollars. Loans were mainly taken over by credit banks, savings banks and credit unions.

This division is interesting because despite the continuing branch extinction and merger pressure, a large number of companies still rely on the house bank. Loyalty to the house bank is a traditional and strong concept, especially for small and medium-sized enterprises (SMEs). The reason for this is that good payment behavior and well-known liquidity development result in credit advantages for the company. Private individuals, on the other hand, tend more towards financial institutions that specialize in lending and often leave their house bank out.

 

Popular and current loan types for home finance

Popular and current loan types for home finance

There are basically two classic types of mortgage loans. These include the repayment loan and the annuity loan. Both models are popular, but differ in some ways. Here it is not always easy to keep an overview or to recognize which loan best suits your own life concept.

With an independent companion like VIST, it is possible to compare offers from over 400 banks with one another in order to receive individual and tailor-made construction finance. In addition, the financing expert provides practical tips and understandable information on the most important subject areas, for example here, on the topic of annuity loans. It is also possible for laypersons to easily understand and apply for annuity loans.

The annuity loan is so popular with construction and real estate finance because the monthly rate remains the same. It is a safe and manageable form of loan, which is why it is used most often. While the monthly payment is basically constant, the relationship between interest and repayment changes over time. The latter is increasing.

The annuity loan is possible in various forms:

  • variable loan with a monthly rate that changes every three months
  • committed loan with an interest rate that remains for an extended period of time

It is also possible to specify special repayments or a repayment rate change in the loan agreement. Other types of loans include:

  • Installment loan : This is another popular loan model. In contrast to annuity loans, the rate decreases over time due to the decreasing interest burden. For this reason, many refer to this loan as “installment repayment”. The counterpart to this is the “final loan”. A repayment is planned for the end of the term with the full amount. By the way, the installment loan is often grouped together with the annuity loan under the generic term “repayment loan”.
  • Personal loans: This variant is an investment by private individuals. Family members are often considered, especially if the equity capital is either insufficient or not available at all. What is important here is a particularly good relationship of trust with each other. Unlike the bank, lenders are at a disadvantage when it comes to payment difficulties when it comes to pressure from family or friends.

 

Popular financing options for companies

Popular financing options for companies

Popular financing options for businesses are

  • Working capital loan : This form is often used to finance current assets. This means that the time between purchasing and sales is bridged. A repayment is made from the sales revenue.
  • Growth loan: Whether it’s a new location, an expanded team, more products or more targeted marketing, the growth loan covers all expansion plans. Nowadays, digitization measures often also count in this area.
  • Investment credit: This loan is used to finance business investments such as machinery, vehicles or means of production. Financing of real estate also belongs to this area. At the same time, these investments count as security.
  • Productivity increase: With this loan, all conceivable restructuring of a company can be financed. This includes automation and digitization, among other things. In the age of Industry 4.0 in particular, this type of financing is becoming increasingly attractive for many companies. To optimize processes permanently, to remain competitive and to be able to meet customer needs in the long term, there is no way around digital productivity today.

 

A future outlook: financing solutions from artificial intelligence to digital full credit

money loan

More and more industries are currently shifting their focus. In the financial sector too, the character of digitization is constantly emerging despite the initial difficulties. May it be AI customer service interfaces or cooperation between banks and FinTechs, the industry is gradually changing. The following three digital trends already provided new financing options – especially for companies – in the past year:

Artificial Intelligence (AI)

Artificial intelligence is an increasingly important topic in many companies. In the future, AI systems will carry out credit checks and support customer advisors. The ongoing learning process in particular makes it possible to make more precise statements about the probability of failure.

Overall, AI primarily serves to accelerate the granting of a loan.

FinTechs

FinTechs is short for financial technology companies. They make the path to financing easier, faster and cheaper. Digital marketplaces for financing with banks and alternative donors open up new access routes. In the future, this should enable a digital loan without analog steps.

Crowd funding

Overall, financing without a bank is becoming increasingly popular. Various projects are presented on online platforms and supported by commercial and private investors with individual sums. There are various forms of crowdfunding:

  • Crowdfunding,
  • Crowdinvesting and
  • Crowd lending

Crowdlending is about lending to companies or individuals. These are mediated by internet platforms. In contrast to crowdinvesting, the lender does not receive company or profit shares, but interest and repayment installments on a monthly basis over a certain term.

Credit for self-employed people despite without credit rating

Even if the choice of financing options for the self-employed and freelancers seems quite large, taking out a loan turns out to be quite complicated in the end. Banks and savings banks attach great importance to collateral and sureties, which as an independent worker can sometimes not be provided at all.

It becomes even more difficult if a loan is sought for the self-employed despite without credit rating. Because even if credit rating does not match, the creditworthiness is usually so bad that there is no creditworthiness.

So it works anyway

So it works anyway

A loan for the self-employed despite without credit rating is not found in any traditional bank. They will never refrain from asking credit rating. Even a loan from abroad cannot help here, as it is only granted to employees and civil servants.

 

It’s possible to get approved for a personal loan when you’re self-employed, but lenders will likely put your finances under a microscope to make sure you earn enough income to keep up with payments.

One possibility is a personal loan.

One possibility is a personal loan.

This is granted by private donors who want to support and strengthen a company with their investment. In order to be able to benefit from such support, as a prospect you have to be able to show exactly what the money is so urgently needed for. Similar to traditional borrowing, a business plan should therefore be drawn up that not only shows the company’s previous strengths, but also gives an outlook into the future.

If you can convince and find a private investor, there should be nothing standing in the way of a loan for the self-employed despite without credit rating. However, even then you should not be tempted by the first offer. Despite the great euphoria about the loan, the conditions should be looked at very carefully. In particular, the interest and the repayment conditions should be such that you can live well with the loan. Because even a private lender wants to have his money back at some point.

And if you then cannot pay, the debt trap and a lot of trouble are inevitable. Things that you certainly want to avoid and that can be avoided without problems if you approach the borrowing with sense and understanding.

Credit without bank statements.

The current account statement is one of the documents that may be required when applying for a loan. In some cases, financial institutions also request statements from the last three months. Based on the account movements, you can check the information provided by the loan applicant regarding the costs necessary for his life. At the same time, potential credit contract partners receive information about the extent to which the overdraft facility is actually used. The private credit checker information only provides information about the existence of such a credit line.

Credit customers often find it uncomfortable to submit bank statements

Credit customers often find it uncomfortable to submit bank statements

Applicants often prefer a loan without having to submit bank statements because they give their contracting party insights into their private use of money, which are not absolutely necessary for lending. In fact, far from all financial institutions do not require bank statements to be presented for the loan application. Many banks are satisfied with submitting proof of wages and possibly a copy of the employment contract. When financial institutions grant a loan without bank statements, they usually set average values ​​for the household account, so that it can be advantageous for borrowers with unusually low household costs to prove their account movements.

Applies for a loan without bank statements

In the case of an overdraft, it is essential to pay attention to the lending without bank statements

In the case of an overdraft, it is essential to pay attention to the lending without bank statements. If the loan applicant has overdrawn his checking account, he must make sure that he only applies for a loan without bank statements. A bank overdraft existing at the time of borrowing is generally considered to be an indication of poor creditworthiness and, at the same time, proof of non-compliance with contractual agreements in financial matters. Banks understand an overdraft only as a negative balance not covered by the overdraft facility. This occurs because most financial institutions give current accounts a tolerance limit for overdrafts if this is caused by direct debits.

In addition, cardholders sometimes fail to notice that there are failures in checking their balance at the ATM or making payments, since the account-holding bank has set maximum amounts that can be withdrawn without checking, which is sufficient for most transactions. An instant loan without proof of wages is usually granted at the same time as a loan without bank statements, since the bank does not request any supporting documents for technical reasons.

Credit for mini jobbers

 

Mini-jobbers are people who pursue marginal employment and derive an income of up to 450 dollars per month. Since such a low income is not enough to make a living, mini-jobbers generate additional income or live with a partner who earns sufficient income. People living alone are entitled to an increase by the employment agency if they are only pursuing a mini job.

Lending a mini-job as a side job

Lending a mini-job as a side job

The easiest way to get a mini job is to do a main job and only wear the mini job to improve your household income. In this case, a financial institution offers itself for the borrowing, in the household account in addition to the work income from the main activity also the income from the minor employment flow.

This is not the case for all credit institutions, some only consider the income earned in the main job as the relevant income for borrowing. If a partner contributes to the increase in household income by means of his marginal employment, while another household member is in full employment, these ideally take out the loan for the mini-jobber and his partner. Borrowing together does not require marriage, but married mini-jobbers can obtain a desired consumer loan more easily without the involvement of the partner.

Borrowing without a main job

Borrowing without a main job

If mini-jobbers do not have a permanent main job, they often earn additional income from a freelance job or from various short-term jobs. In this case, a loan without a proof of income is recommended as a loan for the mini-jobber, since it is unlikely that the bank will take individual income into account.

The waiver of the submission of a pay slip does not exempt the mini-jobber from specifying a realistic average monthly salary, especially since deliberately incorrect information can lead to a later loan termination – even if all installments are paid on time. A loan for a mini-jobber can be arranged relatively easily as an installment payment in the mail order business, especially since retailers only ask about income in exceptional cases.

Loan for self-employed

 

Self-employed people who are looking for an installment loan do not find it easy to find a suitable lender. They also need to be prepared to provide different credit assessment documents than employees. This will usually be the BWA (business accounting), the last tax return and a current income statement.

Compare credit for self-employed with BWA

Compare credit for self-employed with BWA

Not every local or foreign bank issues an installment loan to a self-employed person. For this reason, it can take a little longer to find a suitable lender. Nevertheless, it would be advisable not to access the first best offer, but to compare different offers.

In addition to the BWA, a profit and loss account, an income surplus account or a tax return can be requested from the bank. In addition, regular income must be recorded in the business account or in the private checking account. The credit rating information should also be in order. If all requirements are met, the loan for self-employed persons with a BWA will be approved within a very short time and paid to the borrower.

Credit conditions

Credit conditions

Every self-employed person should be aware that the monthly repayment installments for a loan for self-employed persons with a BWA must be paid on a regular basis, as is the case for an installment or consumer loan for employees. The bank cannot take any account of fluctuating or completely missing income. Those who have justified doubts whether they are able to do so due to their financial situation should refrain from borrowing and look for other alternatives instead.

The length of the term, the amount of interest and the monthly repayment rates, as well as other important factors, are set out in the loan agreement. It must be drawn up in writing and signed by both contracting parties. Often, the lenders grant their customers the right to repay the loan for the self-employed with BWA in whole or in part. This procedure is particularly useful if there is high income or if the self-employed person receives a tax payment.

There are numerous reasons why a person might need a loan. Sometimes, it is actually the only way to resolve problems. That is why it would have been unfair to leave self employed people without the possibility to use it.

Instant loan with bad Credit Bureau

At the house bank, an applicant does not need to hope for an immediate loan with bad credit. On the free financial market, on the other hand, there is a chance to look directly for an offer without proof of creditworthiness and to prefer a loan for which you do not have to put up with the Credit Bureau examination.

Fast liquidity with an instant loan with bad credit

Fast liquidity with an instant loan with bad credit

Current loans, debts or a low income are no reason to refuse a loan request in the free financial market. The applicant can rely on other collateral and thus receive the loan with which he can fulfill his wishes, make necessary purchases or pay open bills without delay. When it comes to instant loans with bad credit, the offers are so diverse that a comparison of the loans is a worthwhile option and can prevent wrong decisions.

The applicant should not only compare the interest, but also the fees for changes in the repayment, as well as his chances of making a change at all. Most of the loans are convincing with flexible contracts, which make temporary deferral, a reduction in installments by extending the term, but also early repayment via special payments possible without any additional costs. The right decision precludes a loan from leading into the debt trap and causing more problems.

Advantages of an instant loan with bad credit

Advantages of an instant loan with bad credit

Consumers with a negative credit rating also have wishes, receive invoices or have to make new purchases. This does not have to be a problem, since the free financial market with loans from private donors or foreign banks is a basis for cheaply getting an immediate loan with bad credit. In the application form, you enter your personal data and the collateral that can be provided, thus making your contribution to the approval. With plausible collateral accepted by the lender, the applicant receives the promise within 24 hours and receives a prompt payment of the loan amount.

Applying for loans through capital lender is easy. An online loan application is sufficient to address both banks and private investors at a serious level. Of course, the borrower decides who gets the loan.

Our customer support team is fast and efficient to clear all your doubts regarding personal loan eligibility, procedures, offers, documentation and repayment options. We even contact with the respective lender on behalf of you.

Instant credit without credit rating in 24 hours payment

For more dire situations, borrowers can turn to debt restructuring. At the most basic level, restructuring refers to altering an already existing contract (versus refinancing which starts with a new contract). An example of a typical restructuring would be lengthening the due date for the principal payment on a debt contract, or modifying the frequencies of interest payments.

If you use the free financial market to search for an instant loan without credit rating in 24 hours, you can choose between different lenders. For this reason, it is advisable to use a comparison and to compare the offers.

So that you can choose the right instant loan without credit rating in 24 hours

So that you can choose the right instant loan without credit rating in 24 hours

In order to find a suitable offer in comparison and to align the loan specifically to your personal criteria, you should be aware of interest and fees and the options for flexible repayment in advance. A search for cheap interest rates alone is not enough to make a loan really attractive and cheap over the entire term.

If a financial restriction is on the agenda due to a career change, it is advantageous to adjust the repayment by deferring or reducing the installments. This does not have to make the loan more expensive, since you can easily opt for a flexible contract and thus allow the repayment to be changed without additional costs. If the overall package is convincing in its terms, you have decided on the right loan and can apply for it immediately from the lender.

Fast payout without compromise

Fast payout without compromise

An instant loan without credit rating in 24 hours payment is requested using the online form and transmitted to the lender via the Internet. In the form, the applicant must provide information about himself, as well as existing collateral. Even if an instant loan without credit rating does not require a credit rating in a 24-hour payment, security must still be provided and transferred to the lender in an amount equivalent to the loan amount.

With the right protection, both the approval and the instruction of the sum will be made in less than 24 hours. For urgent requests, no postponement of invoices or necessary purchases, it is helpful to opt for an instant loan from the Internet. But even if there is a great hurry, you should not ignore the comparison.