The idea of a social loan on the Internet was born in Great Britain, wherein 2005 the website was created. Subsequent pages appeared quickly in other countries. Currently, most loans of this type are granted in the USA, where only the largest website, prosper.com, is used by over one million people.
In Poland, the first social loan brokers appeared 4 years ago. And slowly, slowly settle on the Polish financial market. They gain the trust of Poles thanks to the transparent system and simple rules. They are constantly increasing interest in the form of the number of registered users – at present, it is about 420,000 users for all platforms. Currently on the market are.
How does a social loan work?
It’s a simple idea, and it would seem as old as the world – people borrow money from each other. However, the loan market has been dominated by banks that either limits their services to selected ones or make them pay dearly.
They often combine both. High commission, additional insurance, sometimes the need to have an account. Added to this are expensive reminders in the event of arrears (often charged in an absurd manner). There are also financial institutions that offer so-called payday loans – but no economically educated person will rather reach for them.
What should people do who do not want to take loans on usury conditions – which parabanks often offer or do not want or cannot go to the bank? In such a situation, loan services seem to be a good solution.
By registering on one of the portals we have to verify our data
There are several ways to do this and they often differ depending on the website. We will definitely need to have your ID card and a small amount at hand, which will affect our subaccount on the given website. Sometimes another identity document such as a driving license or passport will also be useful. You can also verify your phone number or place of residence – this will increase our credibility and the chance to get a loan, especially at the very beginning of the service. But it often involves an additional fee.
After successfully creating an account, we can both become a lender and a borrower. In the systems of these websites, there are some safeguards that protect the interests of those willing to invest.
First, how much we can borrow from the community depends on our rating – a rating that is equivalent to credit history in traditional banking. If we are new to the website, we must limit ourselves to small amounts provided for in the regulations. Only when we repay our first loan can we expect more in the future. Alternatively, when we lend to others. What’s more, as the rating improves, we can count on lower interest rates on subsequent loans. Generally, the interest rate ranges from 5% to 25% per annum.
Is such investing safe and profitable?
The introduction states that social loan services are not only an alternative to bank loans but also deposits. Thanks to them, by investing our money – that is by lending to others – we can count on a greater profit than on a deposit.
Our money in deposits, although often do not even defend against inflation, is safe due to the guarantees of the Bank Guarantee Fund. What does the security of our money look like in the case of social loans? First of all, it is never the case that we lend the whole thing to one person.
Usually, there are several lenders behind one loan, so the risk that the entire sum we decide to invest in this way will be lost is reduced. Secondly, user verification systems in intermediary services screen out unreliable people who are in default. We decide who we lend and we can only choose the most trusted ones according to the rating. Among other things, that’s why people try to pay off their loans quickly – they know that if they don’t, they may be blacklisted and there will be no more funds.
Thirdly, in the event of problems with the repayment of our debtor, we can order recovery via the portal, or claim our rights ourselves – we have signed contracts. It is important that loan services, by caring for their reputation, help us recover our money. They even cover fees related to lawsuits and bailiff enforcement. Fourth – the results. In coconut alone, the average repayment rate is 92.6%, and so far USD 77.6 million has been borrowed with its help. The loan repayment rate for the entire sector is 97%.
Trust is the basis
An investment in social loans is not risk-free. However, it is smaller compared to the stock market or other alternative forms of saving. Each site warns against the possibility of non-repayment or slipping. They have full information facilities and tutorials to help those who want to borrow and invest.
In addition, the potential profit that we can achieve is much larger than in the case of deposits or savings accounts. The whole system is based on simple trust, but as you can see it works quite well and not only in Poland. If we trust big men, why not trust other people like us?