Lending is actually the business of banks. Private individuals usually only lend money to friends and family members. So-called crowdlending platforms now also enable personal lending to unknown people. Investors can expect high returns. However, there are a few things to consider.
The risk of an investment is always reflected in the interest rate. In order to arouse interest in a risky project, large profit opportunities must be presented. Borrowers who cannot turn to a bank must therefore offer private lenders a high return for the transfer of capital. For many people, borrowing money is probably a very personal act that requires a high level of trust as a basis. However, when it comes to passing on private money, it is irrelevant whether it goes to close people or unknown people. Caution and prudent behavior are the top priority when it comes to protecting yourself.
Assess the risk as best as possible
If you compare borrowing from a bank with that on a crowdlending platform, you will see that bank interest rates are usually significantly lower. Now the question arises, why do people actually seek out other lenders outside of banks? Most borrowers are on the online credit marketplaces for a reason. Those in need often have no choice but to ask private individuals for money. You have most likely been classified as not creditworthy and will therefore not receive a cent from the usual institutions. The final source of financing is the crowdlending platforms. As a private lender, you should be aware of the high risk of default and get the best possible information about the borrower. However, banks have significantly better access to information and can assess creditworthiness more accurately. Only when you are convinced that the business could be worthwhile should you enter into an agreement.
The same principle applies to lending to friends and family. Before the money is loaned out, you should find out exactly about the other person’s current situation or have it explained to you. For the lender, the total loss of the capital invested is always at stake.
To set up a contract
In order to accurately record the facts, a contract between both parties is essential. Even between friends, in an emergency, there can be very unpleasant consequences without a contractual arrangement. With a purely oral agreement, the lender has no recourse against the debtor if the debtor has payment difficulties or does not fully comply with the agreements in some other way. A contract makes it clear to both parties that it is a loan and that the specified conditions must be adhered to. According to the credit comparison portal smava, the following points must be included in the contract: the names and addresses of the lender and borrower, the date the contract was concluded, the express designation as a loan or loan, the amount of the loan, the date of payment, the repayment regulations and dates ( e.g. monthly installments) and the signatures of the contractual partners. In addition, the amount of the fixed interest rate and possible collateral can be included. It is also an advantage if possible witnesses can provide evidence of the conclusion of the contract.
Provide insurance
To minimize the risk of suffering a total loss, lenders should provide certain safeguards. According to the crowdinvesting platform BERGFÜRST, many credit portals provide investors with various protection mechanisms. Users of smava could therefore join an investor pool so that in the event of a payment default, the loss is distributed among all members and no one loses all of their capital. In addition, other options for spreading risk are conceivable. Lenders can also demand collateral from friends. This means that in the worst case scenario, creditors are not left empty-handed.
Editorial team finanzen.net