If the dealer does not pay, or pay exorbitant interests, individuals lend to each other. This is the philosophy that lies behind a recent phenomenon known as P2P Loans, Peer-to-Peer Lending. Getting credit for a particular via the Internet is relatively new in some country, but not in the U.S., where this business model has already served four years. But loans are also known as P2P in United Kingdom, Germany, Italy or Japan
Confidence
One of the most important person to person lending is trust. In the traditional offline model, this trust is placed by the lender in which the borrower and is based on the existence of a strong hope in returning the borrowed. This means knowing the person you are going to ask for money and have a relationship close enough so that he would not “trust” and pay the money. The trust must be generated a priory, assuming a prediction of fulfilling a commitment, a statement about what is uncertain and can not be verified, in this case because it refers to a future outcome that will service the loan, plus interest. The advantages of this method is that it eliminates the bank as an intermediary, putting together web sites directly to lenders who need to borrow, with the advantage of obtaining lower rates than they would at a bank or through credit cards, as lenders get high returns on their investment, at least higher than depositing money in a bank.
Individuals ‘bridge’ to the Bank
P2P Loans offer citizens the possibility of social lending, a new form of financing carried out directly by people willing to lend money. Before the economic crisis in which we find ourselves, traditional financial institutions becoming more expensive credit. Whether done through friends, relatives or strangers on the Internet, people are turning to micro subsidiaries responsible for granting loans, instead of going to lending institutions such as traditional banks. This trend is experiencing a growing popularity because it offers often at rates more favorable than they can provide traditional lending institutions. For its part, the person offering the loan also benefits from this type of transaction, as you gain greater economic return compared to what they would put their money into a conventional investment method, receiving higher interest rates directly from loan recipient.
Introduction to loans per to per
Hardly anyone would lend money to a stranger. Thus, in cold, very seductive idea. But new technologies, Internet and development of social networks have brought consumers a new way to seek funding and lend (invest) certain amounts in exchange for an interest. Platforms are loans between individuals: anonymous citizens who solve their money problems, without the intermediation of traditional banking.
P2P Banking concept comes from a very common practice done throughout history, long before the development of the banking system or the use of currency. The loans made directly from family, friends or acquaintances have always been a source of funding for those who need liquidity. Normally, the amounts provided are small compared with the agreements of the big banks so that shape what we would today call “micro finance.” These loans are generally without collateral or guarantees, the money is paid based on a previous relationship that allows the loan, the collateral for these loans is done on trust.
If you are really interested in the social aspect of this “skipping to the bench,” becoming a bank yourself.
Bidding System
The mechanics are straightforward. If the borrower is trusted, starts an auction among lenders interested in taking that risk in exchange-course-of a juicy rate: between 8% and 10-12% in most cases. A higher level of creditworthiness of the borrower, the lower the profitability, because it assumes less risk. One also minimizes that risk because it lends itself to many different people at once. Borrowers can apply for up to 50,000 euros to pay a maximum of four years
