Bank loan and loan between individuals are 2 financing options available to you when you want to obtain credit. Of course, each of these solutions is distinguished by its operating principle, its advantages, its constraints and its risks.
Focus on the distinction between peer to peer lending and bank lending, to help you choose the credit solution that best suits your needs.
How does a loan between individuals work?
P2P loan works quite simply. It allows individuals to lend or borrow credit to other individuals via specialized digital platforms, under relatively flexible conditions.
This financing mechanism mobilizes three categories of actors. In particular, borrowers who may be individuals or companies seeking credit, lenders who act as investors, as well as P2P platforms acting as intermediaries. Concretely, Lenders and borrowers are put in touch through the crowdlending platform on which they are registered.
Borrowers will submit their project and the amount of credit requested. The platform assesses the profile of borrowers, assigns them a credit rating according to the risks they present. Investors who intend to support the project can freely determine the amount they wish to lend, the interest rate as well as the term that the borrower agrees to repay.
Advantages of a loan between individuals compared to a traditional loan
The advantages of this alternative loan compared to the classic loan are numerous. For the borrower, the P2P loan is synonymous with flexibility. An easy way to obtain credit when your borrower profile does not meet the standard criteria for access to bank credit.
In addition to the flexibility of the criteria, the P2P loan outweighs the bank loan in terms of speed. With formalities more streamlined, funds can usually be collected and passed on to borrowers within 48 hours to a week. This is done without even necessarily having to offer a guarantee / deposit.
For lenders, P2P is like a potentially profitable investment. Take for example the Mintos platform, with it it’s a simple way to earn additional income by taking advantage of relatively high interest rates, with low risk. But it is also and above all an opportunity to help people in need, a social and solidarity dimension that is lacking in traditional loans.
What are the differences in risk?
The peer-to-peer loan and the bank loan both present a common risk, that of default. There is indeed a possibility that the borrower will not be able to repay all or part of the loan taken out. Of course, this risk is assessed differently depending on whether we are dealing with a P2P or classic loan.
In the context of a traditional loan, the default of the borrower weighs more heavily on the credit organization which may be threatened with bankruptcy. This is why the latter are more rigorous in the criteria for granting credit and the repayment guarantees available to the borrower (mortgage, surety, etc.).
In the hypothesis of a P2P loan, the risk of non-repayment turns out to be more detrimental for the lender-investor who may lose his invested capital. To this is added the risk of failure of the platform or that of bankruptcy of the partner credit company.