Social loans are most often considered from the point of view of investors who would like to set their cash in motion and make money on it, for example by granting loans. Establishing a loan company from a legal perspective is not difficult or subject to many requirements, but for a novice and small investor it can be an obstacle – the founded company must be a company and the initial capital must be at least USD 200,000. In response to such demand, companies have been created to search for lenders and offer an environment in which transactions could take place.
Social loans – what is it?
Also known as English social lending or P2P ( Peer to Peer) loans, this type of borrowing is based on transactions between the borrower and the investor, when both parties are usually natural persons. The transaction can take place directly, and investors can look for potential borrowers themselves, but most often this is done so that both parties meet on an intermediary internet platform on which borrowers can “issue” their loan applications, and investors – make offers to them . Both parties usually use the forms already proven on the market: payday loans and installment loans.
How does the online social loan platform work?
From the borrower’s point of view, almost all transactions take place in the same way as a regular online loan from a non-bank institution. He must enter the website offering this type of loan, register on the site, select the loan amount and repayment period, and then submit an application.
After this operation, the loan procedure is slightly modified. The borrower’s application is placed on the list, which is only available to investors. They can see on it what the applicant’s financial situation is, what his income and overall creditworthiness are, as well as how the verification of his credibility in BIK and other similar databases has come out. The investor can then respond to an application that interests him and submit his loan offer.
Are social loans secure?
When it comes to technical issues related to obtaining a loan, the borrower doesn’t have to worry about anything. The data contained in the application may not leave the online platform, and the applicant for the loan is verified to the same extent as in other loan companies, most often by verification transfer or through the application used for Quick Verification.
When it comes to the security of borrowed capital, the borrowing investor may take the greatest risk. Of course, he is aware of who he is lending to and what the borrower’s situation is. It depends on him whether he prefers to earn less on granting a loan, but be more certain that the money will be repaid to him or vice versa.