Can you get a loan without a bank?
The best-known example of taking out a loan is to borrow money from a bank. However, this is not always easy and possible for everyone. To avoid going to the bank, you can also take out a loan from a private individual. This offers advantages for both parties and is an uncomplicated alternative to the conventional financial institution.
Such a personal loan can also be called a peer-to-peer loan. This is because the money goes from one person to another without detours. The lender is therefore a private person who makes their money available. The borrower does not necessarily have to be a private individual. Such a loan is also a good solution for companies and self-employed who need financial resources.
A particular advantage of this type of loan is that in most cases there is no credit check. This loan is therefore suitable for people who do not get a loan from the bank because of their liquidity. The chances of getting a loan from a private individual are much higher.
Furthermore, the terms of private loans are much more flexible than is the case with bank loans. Maturities and payment terms can be freely determined among private individuals. However, there is also an obligation to repay the loan.
If a private person grants a loan, they naturally hope for a certain return. The personal loan is seen as an investment. Accordingly, the annual percentage rate is usually higher than that of the banks. The same generally applies to the monthly installments. Of course, this also means that the lender wants to secure himself financially.
What are the requirements?
In order to get a private loan, the borrowers have to meet some requirements. For example, the borrower must have their place of residence and their bank account in Germany. This is because as a lender you want to protect yourself against fraud. In any case, a loan between private individuals should be regulated and recorded in writing. In this way, later disputes can be prevented.
It is also important to deposit collateral. A minimum age of 18 is also required to take out such a loan. Regular income should also be proven. This can be done with an account statement or after the wage statement. It is always an advantage if the borrower can provide evidence of several months of regular income.
Showing a permanent position outside the trial period also has a positive effect on the granting of loans. Furthermore, there should be a certain minimum income. Of course, this can vary due to the amount of the loan.
Sufficient income from a loan without a bank
However, an income of at least 1000 USD per month should be proven. Thus, the lenders protect themselves against default. There are also borrowers who prescribe a maximum age for the granting of a loan. This must not be exceeded when recording. However, this decisive age also depends on the agreed term. It may also be necessary to specify the purpose of the loan when it was taken up.
Depending on the purpose, the lender may request a budget. This must then include the planning of the repayment and be approved by the lender.
A simple loan from a private person is usually received in full from that person. So if you take out a loan of 1,000 USD from a lender, you also get 1,000 USD from one person. However, it is also possible to split the loan amount over several lenders. This spreads the risk for the individual and increases the chances of lending, even with large sums. For example, if you want to take out a loan of over 20,000 USD, you can take out 10,000 USD from lender A, 7,500 USD from lender B and 2,500 USD from lender C.
In total, you get a loan of 20,000 USD. Every lender contributes as much as he is ready. However, this also results in different rates and terms for the individual loans.
Loans are always needed in everyday life, for example when surprisingly large purchases are necessary or there are larger costs that were not expected. However, more and more people tend not to turn to a bank for a variety of reasons, but mostly because banks charge huge interest rates or have very strict requirements for their loans.
Find private lenders
A loan without a bank is now quite possible, which is usually done through private lenders, some of whom offer their capital as a loan, but sometimes also through special intermediaries who take care of the details. The procedure for a loan without a bank is in principle similar to that known from the classic model.
There are certain requirements, such as a fixed income, an impeccable Credit bureau, and so on. If these are given, a loan can be granted within a certain framework.
Then it is a matter of finding a lender who fits the borrower’s ideas regarding the amount of interest, the monthly installments and the term of the loan. If this step is also completed, everything is fixed in writing and there may be a payment for the loan without a bank, which the customer can then use.
In the future, as with a classic loan, you will be paying fixed installments of a certain amount every month until the loan and the interest accrued have been repaid in full.
Backgrounds also count
A credit without a bank has the advantage that not only the bare facts and figures count, but also the human aspect can play a certain role. In particular, the intermediaries and corresponding platforms offer the borrower the opportunity to describe why he needs the loan and what triggered his situation, which can also make it easier for the lender.
Banks, on the other hand, are less interested in the background than in the fact that the creditworthiness and the monthly income and expenses of their customers fit and that they get their money on time.
This is also important for a loan without a bank and does not matter, but it is not extremely important. On the other hand, some customers certainly lack a certain feeling of security with a loan without a bank, because banks can look back on years of experience that private donors lack, especially since the credit without bank model does not yet exist outside of the narrow circle of friends as long as it is in use and not many people can report experiences that they know themselves.
Borrowing the desired amount of credit online and paying it off in reasonable installments simply and conveniently sounds tempting. There is also a simple system behind it, private investors invest their money instead of the savings account on this platform.
It works like this:
The investor looks at the loan requests of the individual borrowers. Depending on whether a borrower appears to him to be creditworthy or not, he invests a certain amount for the desired loan. If enough investors invest their money with a certain person so that the desired loan is full, the borrower will receive a message by post or email and the desired amount will be transferred to their account. The borrower then pays back the agreed monthly installments including interest, and investors receive their share of the interest each month in the account.
However, it must be borne in mind that these platforms also charge their fees after a loan is taken out. Thus, the desired amount including interest can be a little higher. As a rule, this is about 3% of the loan amount, which is paid off in installments.
However, a borrower must first be able to prove that he is creditworthy. So he has to provide his Credit bureau information and indicate his desired loan amount including monthly installments and term. The platform then places you in a certain internal procedure, which can range from AAA to X. One can be classified with a nominal interest rate of 2.9% up to a maximum of 15.25%. In most cases, the borrower also has to state the reason for the loan. At the same time, if the reasons are justified, the chance of drawing investors’ attention to the project increases.
If you have a bad Credit bureau entry, for example, this is not necessarily the end of a loan from private to private. However, significantly higher interest rates must be expected, because in this case investors run an increased risk of not receiving the amount invested, including their interest, if the borrower becomes insolvent.
Consider additional costs
Depending on the internet platform, such credit requests can take up to $ 1 per day. Such an advertisement can stay online for a maximum of 90 days. That means, whether the loan is fulfilled or not, with a waiting period of 90 days, an additional cost factor of $ 90 could be added. These $ 90 will be debited from the account immediately, only then will the loan amount be transferred.
Borrowing money from a private person is certainly a good idea and, on the contrary to the bank, can be worthwhile. However, before making a loan request on one of these Internet platforms, you should be well informed and read the terms and conditions in order to uncover hidden costs.