Online Credit Exchanges: Personal Loans on the Internet
The Internet is now home to platforms that bring together private borrowers and lenders and take over the lending. These loan exchanges are an alternative to the traditional financial institutions. They offer a way, especially for loan seekers, who were rejected by the banks with their loan application, a way to raise capital in the market. In addition, the borrower saves money: There are no expensive fees and interest rates are on average lower than conventional bank loans.
On-line platforms can bring both individuals and business people capital. Especially for entrepreneurs, it can be difficult to borrow the necessary start-up capital from a bank for their projects. Often, their loan applications are rejected because the person in charge may find their business idea unconvincing enough. A loan through a loan exchange can be the solution here. Even persons with negative information about Schufa can receive a loan through a loan exchange.
The most well-known credit exchanges in Germany include the companies Smava and Auxmoney . Both were founded in 2007 and have been operating very successfully in the market ever since. A person-to-person loan can be a real alternative to a traditional bank loan for people seeking a loan.
How do credit exchanges work?
To place a loan application, the borrower must register with the online platform. The following documents are required: passport plus confirmation of registration or identity card, the last three pay slips, current bank statements and proof of bank account. The self-employed must also submit their income tax assessment and the balance sheets of the past two years.
After successful registration, the loan seeker creates his request with loan amount, desired interest rate, duration and a detailed project description. The request will be online soon. Now private investors have the opportunity to respond to the loan request. When a loan agreement is made, the online portal collects fees from the borrower and the lender. These are calculated according to the amount of the loan and the term. If no contract is concluded, fall on most credit exchanges no cost.
Investors need to be aware that there is no deposit guarantee for online loans. Accordingly, they should be careful when choosing the loan portal they want to work on. The risk of a loss of invested money should be kept as low as possible.