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.