How to consolidate your loans?

A few years ago, borrowing money from a friend, a relative, or a neighbor was one of the few ways you could get financing out of the bank. However, thanks to the explosion of fintech companies, the options for obtaining credits have multiplied. One of them is to go to the P2P or crowdlending loan platforms, where individuals who need financing and people who want to invest in their projects to get profitability meet.

What is a loan between individuals?

P2P loans, also called between individuals, are loans that are granted through crowdlending platforms that connect users who need financing with investors who want to lend money to obtain profitability. Through these platforms, investors can consult the different projects and decide which of them want to contribute capital according to their level of profitability and risk.

The requirements of payday loan support are more flexible than those of bank loans.

Operation of P2P loans

Before applying for P2P loans it is important that we know what the application and grant process is. These are the steps we must take:

  • First of all, we must provide the credit platform between people with the credit data we want to obtain (amount, term and purpose) and our financial and banking data. We must also send the documents requested.
  • The administrators of the P2P credit platform will analyze our request and our data and assign us a level of risk. The higher our level of risk, the higher the interest applied.
  • The crowdlending platform will communicate its offer and, if we accept it, it will publish our project on the website.
  • The investors will be in charge of contributing the capital of our loan to individuals in a period that normally lasts about two weeks.
  • When the total amount we have requested is reached, the P2P loan platform will deposit the money.

In addition to the interest rate applied, if we ask for loans between people we will also have to pay a commission to the P2P credit platform as compensation for their efforts.

What if I want to invest in P2P credits?

Investing in P2P loans is an increasingly popular alternative in Spain to obtain returns on our capital due to the low profitability offered by other financial products. Through these platforms, we can decide to finance different loans according to the risk profile assigned by the platform and the profitability they offer. This is how the investment in P2P loans works:

  • As we have said, the crowdlending platform publishes the different projects in which we can invest according to the level of risk assigned by the entity and the interests that it will report to us. The more risk the investment entails, the more profitability we will achieve.
  • To invest we must “buy” a part of the loan, becoming borrowers. Each platform will set a minimum amount to invest (which can be from € 25) and a maximum. Limiting the maximum amount to invest in a single project will help us to reduce the risk, since it will be shared among several investors, and to diversify our portfolio.
  • The interest rates, the reimbursement and the duration of the investment will be determined before making the purchase of the securities. Each P2P loan entity will set a term to collect profitability, the most common is that we receive a part of the capital plus interest on a monthly basis.

We must bear in mind that the capital invested in P2P loans is not guaranteed. The platforms usually take the usual measures in case of default, but there is a risk of losing part of our capital invested.

Alternatives to Payday Loans

The payday loan business is very lucrative. The companies that are involved in this market benefit from the excessive interest rates and fees they charge for their products, and it’s not just the borrower who suffers. Payday loan companies have indeed marginalized the old private loan companies, which, often governed by families, charged fair rates and reasonable terms.

In many ways, payday loans are very profitable. If you quickly need a loan, payday loan companies do a great job when it comes to getting you cash.

Costs for consumers are excessive, even abusive, but it is not the only problem. It’s so easy to qualify for payday loans as traditional, local and private lenders have a hard time staying on the surface. You see, because small private lending houses charge much lower fees and rates, they tend to get more information before funding a candidate. This means that approval will not be as easy or as fast (though, overall, it’s a relatively quick procedure) as approval for a payday loan. However, by borrowing from a private lender instead of a payday lending institution, you’ll get better rates (something like 10% of what payday loan companies charge) and a nice feeling that you’re supporting them. local businesses.

The rise of payday loan companies threatens the market for private lenders, and this is not good news for consumers. A world in which small or microloans come with fares and fees that far exceed the loan amount does not seem to be an ideal world, is it? Let’s see what are the alternatives to payday loans:

1. Private Lenders

 1. Private Lenders

Private lenders are usually made up of local businesses. They represent a dispersed market across Canada. Many of them offer secured loans as well as unsecured loans. They can provide loans against a property, vehicle, or similar asset at reasonable rates.

2. Borrow from a friend or family member

2. Borrow from a friend or family member

Borrowing from a friend or family member is not always easy, but sometimes it’s a necessity. Given the current market uncertainty and the high costs typically associated with smaller loans, this is an option that should not be discounted.

3. Have you tried to apply to your bank?

Banks do not always get along with unsecured loans, however, if you need money to make a purchase, the bank could advance you the money. In this case, the loan will be guaranteed against the purchase you make (for example, a car or a snowmobile).

4. Do you have some home equity?

4. Do you have some home equity?

If you have some home equity, it will be much easier to find financing. You can probably get a line of credit or a second mortgage to meet your monetary requirements. You can also refinance your current mortgage to get easy access to the amount of money you need.

5. Do not necessarily opt for a loan

5. Do not necessarily opt for a loan

This is an option that many neglects. Alternatives to borrowing include: getting extra hours of work, finding extra work, requesting an advance on your payment to your employer, liquidating things you do not need … you have a lot of options. Do not exclude them!

Do you need a helping hand to balance things out?

Contact a financing specialist at Prêts Québec for advice and information. We will help you make the right decisions.