As the economic and financial crisis has worsened, the credit drought has become increasingly common, and both individuals and especially companies have had to resort to alternative financing methods to bank credit to obtain the liquidity that they need in their daily business.
One of these methods has been the loan between individuals, a way in which no financial intermediary intervenes and that, in many cases, is simply microcredits or credits with a low amount that can range between 300 and 100,000 USD.
How do private loans work?
The operation of the loan between individuals, also known as micro lending, is the same that would occur in the presence of a financial intermediary. Those agents with a surplus of economic resources (with savings) lend their money online or offline to those individuals who need funds through a micro lending platform whose purpose is to pool the interests of each other.
It is very frequent the intervention of several people, lenders or private lenders who contribute their funds to cover the financing needs of one or more borrowers. In this sense, it has certain similarities with group funding, with the difference that, instead of using micro-donations, lenders charge to lend their money.
This model, despite not yet having the acceptance or expansion that group funding has, has grown very rapidly in recent years. In 2013, micro lending moved close to 3,000 million dollars worldwide with a growth of 150% compared to the same period of the previous year.
This rapid growth is due to the rapid development of the Internet and the popularity that social networks have acquired in recent years. In addition, the increasing sophistication of investments and the high demand for economic resources other than traditional bank loans have made its popularity have grown in recent years.
Where are the interests of lenders and borrowers traded?
micro lending could not function efficiently if there were no platforms where the interests of lenders and borrowers were negotiated. These platforms, which act as if they were financial intermediaries that channel savings into investment, have experienced significant growth in recent years.
In the absence of credit, financing alternatives are always welcome. Among them, peer-to-peer lending is enjoying wide acceptance among savers and those in need of financing. There is a reason that it has been experiencing such growth in recent years.