On the Polish market, interest in social loans is low, but in other European countries they are quite a competition for banks, non-bank institutions and investment products.
Social loans – how do they work?
What is a social loan? A social loan is a civil law agreement concluded between two private persons, without the intermediation of banks or loan companies. The subject of a social loan agreement is a specific amount of funds that one party provides to the other under certain conditions.
The role of lending institutions in this case is played by social loan platforms connecting people who need extra money with those who want to lend them. They provide tools to complete transactions and help you recover funds in the event of default.
Unlike products offered by banks and loan companies, social loans are not subject to any supervision. In practice, this means that all the terms of the loan depend on the arrangements between the parties, with the person giving such an obligation may request a commission of any amount.
Providing social loans can be profitable and can become a way of earning a salary, provided that we do not run into a dishonest borrower. Admittedly, borrowers are usually verified and checked in BIK and other debtors’ databases, but this is not always reliable and does not guarantee repayment of the loan
Social loans ranking – where to look for offers?
There are many websites offering social loans. One of the most popular is the kokos.pl website, where the regulations have recently changed. Until now anyone could be an investor, currently only a company entered in the Register of Loan Institutions (kept by the PFSA) can play its role. Blue Media SA is now the main investor of kokos.pl
There are also portals where social loans are only offered to companies. One of them is Good Finance – an institution supporting entrepreneurial people that approaches running a business in a modern and flexible way. At Good Finance, entrepreneurs can apply for a loan of up to USD 3 million. Business owners can also apply for a loan at Capital Club or Mintos.
Social loans for those in debt – is it possible?
The great advantage of social loans is that they can benefit those in debt. Banks usually do not grant loans to customers with low creditworthiness and a negative credit history. It happens that loan persons go hand in hand with such people, and although they verify their creditworthiness, it does not affect the decision to grant a loan.
The same applies to social loans. Financial arrears do not have to cross the loan chance. There are websites where you can get additional funds regardless of your credit history. Each application is examined by them individually, so you can get loans for those in debt.
How do you get a community loan?
To receive a social loan, you must first register on the selected portal, which usually takes no more than a few minutes. When creating an account, you will need information such as:
- and my name and surname,
- Social Security,
- ID number,
- Bank account number,
- e-mail adress.
The next step is verification, which takes place usually in bed d ch stages. The first is mandatory and the second is voluntary, but it increases the borrower’s credibility and places him at a higher level (“rating”) after successful verification.
After registering and verifying your account, you must submit a loan application. At this point, you must specify the terms of the loan. After specifying them, one should wait for investors’ suggestions. When the offers come in, one should choose the most profitable ones.
Can I get a social loan online?
There are smaller and larger websites offering social loans over the internet that can be divided into those that offer loans to individuals and those intended for entrepreneurs. The portals act as intermediaries between social investors (lenders) and borrowers.
They play a similar role as, for example, a real estate agency when buying an apartment. Online social loan services charge a small percentage of the borrowed amount for the service.
How much does a social loan cost?
The total cost of the loan is the most important thing for each borrower. There are no free commitments in the social loan offer, but there is still a chance to negotiate favorable borrowing terms.
In any case, the cost of the social loan depends on the individual arrangements between the investor and the borrower. It is worth being aware, however, that the interest rate on the loan is as per the so-called Anti-usury law can not exceed two times the sum of the reference rate and 3.5 percentage point in the bed. Currently it is 10 percent per year.
The cost of the social loan includes:
- interest rate
- fee for granting the loan,
- commission for the intermediary platform,
- additional verification fee,
- a fee for extending the loan period in case of problems with paying the loan installments.
When you take a social loan, you have to take into account the tax on a private loan, which is 2 percent. How do you settle social loans? The borrower is obliged to settle the tax on private loans and the investor is obliged to settle the capital gains tax.
Is it worth investing in social loans?
Investing in social loans involves quite a lot of risk, as investors can never be guaranteed of getting their money back. However, every investment carries a risk, except for savings accounts and deposits, and the higher the risk, the greater the potential profit.
Can investments in social loans pay off, then? Yes, especially since you can minimize the risk of capital loss by diversifying your invested money. Social loans provide much more profit than bank deposits or treasury bonds.
Social loans – how to invest?
To start with, you need to choose the portal you want to work with. Each of the websites operates according to different rules, so the proposed methods of risk assessment or collateral for loans in the event of non-repayment may differ.
Therefore, before you start investing, read the terms of service carefully and check the amount of fees charged.
Advantages and disadvantages of social loans
Social loans have their pros and cons.
Advantages of social loans:
- wide loan offer,
- money for any purpose,
- high loan amounts,
- inference without leaving home,
- high loan granting,
- voluntary verification,
- you don’t have to have a good credit history,
- loan costs negotiable.
Disadvantages of social loans:
- service fees,
- no legal regulations protecting the investor and the borrower,
- risk of fraud
- costs related to additional verification,
- waiting for a loan longer than in a bank or loan company.
Are social loans secure?
Unfortunately, there are no legal solutions regarding loans of this type in Poland. We will get the payday loans much easier than a bank loan. That is why it is really safe to use them.
Both lenders and borrowers should use portals with an unblemished reputation and an established market position. Before taking out a loan, read the terms of service.
A person considering taking out a social loan should realistically assess his financial capabilities and choose a liability in the amount that will not be a problem for him to pay back. Social loans with an interest rate of over 10% or too high commission should be rejected immediately.
After selecting the offer, and before signing the contract, you should carefully read its content, and any doubts as to the provisions contained in it must be clarified with the lender or lawyer.