Borrowing money privately is popular. More and more websites and portals offer opportunities for crowdfunding or crowd financing. The article provides a look behind the scenes, looking critically at risks, but also naming opportunities.
Crowd financing – borrow money from private
Crowdfunding, borrowing money privately, is becoming increasingly important. Comprehensive changes in the law, the LLB’s low interest rate policy and not least the USD crisis have made the business model hopeful. The basic idea is amazingly simple. Risky business ideas, popularized by private lenders through film projects, cannot simply be financed through a credit institution. Despite the good profit prospects, the risk is simply too great for an individual investor or a bank.
If the risk is distributed to a large number of private investors, even a total loss would be bearable for the individual investor. Risky projects were funded, often with great media attention. Borrowing money privately became known. Nevertheless, it was only the beginning of a business idea that helps many people today. The financial crisis was much more decisive for the success of established credit portals such as Trucredit, Fidor or Centiloan. The crisis solution currently achieved resulted in two losers and one winner.
Large investors who speculated with worthless paper and increased their wealth won. With public aid, they were able to save their returns through the crisis. The ordinary citizen has lost. As a taxpayer, he is responsible for the LLB’s rescue packages and bond purchases. Good paid jobs were destroyed across Europe, a network of “low wages” is doing the work today. Despite a full-time job, these people do not get a loan. Small savers are also losers. The low key interest rate destroys your savings reserves.
Credit from private to private – win-win situation
At the beginning of the millennium, Germany was considered the “sick man of Europe”. Reunification was far from over. Serious experts had already predicted in 1989 that it would take around 20 years for Germany to regain strength. It had to bear the collapse of the GDR, the loss of sales markets in the east and the costs of reunification. In order to prevent the final overloading of the social systems, Germany should become competitive.
Agenda 2010 can be seen as the father of the success of personal loan portals. The change in the labor market and the pension reform caused great demand. Borrowing money privately was and is the only credit option for many employees. The financial crisis ensured that small investors provided sufficient capital inflows. With a key interest rate of 0.25 percent, savers cannot offset inflation. The offered interest for “safe” savings investments fall below the devaluation of money.
Being able to borrow money privately from a legal and secure environment creates a win-win situation. Financing offers again to workers, self-employed and pensioners who would nowhere get credit. The annual percentage rate to be paid for this can be considered to be in line with the market. It is ultimately decided in the bidding process. The system is an opportunity for small savers who do not want to watch how their money burns. The opportunity to invest in a modest way makes lending comparatively secure. The interest income achieved, even if a repayment does not work, ultimately results in an interest gain.
Risks for investors and borrowers
Private lending is a growth market. More and more websites offer private loan brokerage. You want to cut off a piece of the cake. Against the background of saving fees or implementing impossible financing requests, borrowing money from private to risk. A borrower’s wish to save the fees for a loan brokerage is legitimate and understandable. If you have little money, you just have to save.
However, savings are made at the expense of security. From contacting to credit processing, everything has to be organized by free portals. Borrowing money privately can become a risk if the implementation of applicable laws is not monitored. Excessive interest, the Stiftung Warentest has determined top values of 20 percent and more, may result. In addition, a private individual cannot understand the origin of the money. The risk of losing up to five years in prison for money laundering allowance is not worth the minimal savings.
Without an ID check and an extensive dunning process, it can also be dangerous for the money of the serious investor. If the borrower does not pay back, “good money must be thrown after bad money”. Dunning and the title of the claim are only taken over by the established portals. A private investor, without the protection of the established credit portals, can usually only say goodbye to his money.
What recommendation can be given?
Borrowing money is the only way out of the credit crunch for many people. Nevertheless, we can only strongly advise against saving at the wrong end or “wanting to force a loan”. Everyone should be aware of how complicated and dangerous monetary transactions can be. To want to borrow money at any price, to do without protective mechanisms, almost always leads to a dead end. There are life situations where no loan is possible, neither from a private person nor from a credit institution.
Investors also pay to the established portals. Nevertheless, everyone can only be given the urgent recommendation not to get too greedy. The protection that Trucredit, Centiloan and other established credit portals offer cannot be offered for free. Safe investments may only generate a slightly lower return, but the savings saved are not exposed to unnecessary risk.
Borrowing money privately offers exceptionally fair credit opportunities for borrowers and fair interest for investors. The business model is a win-win option as long as professionals in the background ensure fair rules and a smooth process. Borrowing money privately as well as lending money can also quickly become a risk.