This is how crowdlending works
Both sides register on the corresponding internet platform, whereby there is a different registration mask for loan seekers than for lenders. The loan seeker presents his project and the future lenders decide whether they want to invest in it. If there are enough participants for the investment, the contributions that everyone makes are combined into a loan amount. Of course, the operator of the online marketplace also receives a certain amount as a fee, because only then can the offer work.
Applicants have to provide various information about their situation, on the one hand the financial, on the other hand the personal life situation is examined. This should make it possible to assess the applicant's creditworthiness. A type of rating is carried out, which shows the risk of a credit default. After all, investors don't want to have to give up their money and profits! In addition, the individual credit default risk is important for the amount of the interest rate. The higher the risk, the higher it is. If the credit decision is positive, the project is presented to potential investors who only need to register to participate. Their identity is checked, after which it is possible to invest on the platform.
Advantages and disadvantages of crowdlending
Crowdlending has many advantages for both parties involved:
- fast lending and transparent process
- Lending also possible with poor creditworthiness
- Lending also possible with past debt collection
- Attractive returns possible for investors
- Risk minimization thanks to an internal rating
- Supervision of the project is carried out by platform operators
Nevertheless, there are of course disadvantages. These consist of the following points:
- Loss of investment if the borrower is unable to pay
- possible defaults due to late payments possible
- lower return possible due to early loan repayment
- high rejection rate for loan seekers
- high interest charges with poor creditworthiness
- sometimes long waiting times for a decision
Disadvantages are particularly evident in a direct comparison with a personal loan. The amount of the loan amount becomes clear very quickly with the latter, but with crowdlending it may be that the loan cannot be obtained in the desired amount because there are not enough investors. However, the search for investors takes some time, so considerable waiting times must be expected. Who needs a loan quickly is rarely well advised with crowdlending.
Important: The loans that are granted in crowdlending are not subject to the consumer credit law and its special protection. This means that nobody is protected against over-indebtedness here. In addition, higher loans are difficult to obtain, and the risk is usually too great to grant a large sum.
Conclusion
Crowdlending is therefore particularly worthwhile for those who are looking for an alternative to traditional bank loans and want to borrow money in an uncomplicated manner, although the loan amounts should not be too high.
If you want to compare crowdlending with personal loans, you've come to ours loan comparison precisely!
Source: comparis.ch
