What are loans between people in Nigeria
Loans between people or p2p loans (Peer-to-peer lending) are a type of credit that is made through digital platforms and that connects investors with users who require financial support. In p2p loans there is no bank as an intermediary, but financial services technology companies.
Technology has greatly modified many of the processes we know, one of the most significant transformations we have seen is the collective economy. Have you heard about this concept? It is very likely that it is even something that you live with in your daily life and you have not realized it, we are going to explain it to you.
The collaborative economy refers, as its name indicates, to the collaboration that exists between people, be it regarding finances, consumption, knowledge, among others. This term includes all those actions such as: selling, lending, renting, exchanging and some more, with the aim of satisfying certain needs.
An example of the best known and most used are the different companies that offer transportation to users through an application where they rent private cars. The list also includes food services, rentals of places to stay, among others. Now, this concept also includes economic aspects, such as loans between people, let’s learn more about them.
How do loans between people work?
P2p loans work as follows: they are financial service platforms that rely on technology to act as intermediaries between investors and people seeking a loan, their processes, step by step, are as follows:
- Through applications or websites, people can request a p2p loan.
- These companies determine the terms and conditions, including interest.
- Applicants have a financial profile, which assigns them a risk category and based on this, the interest rate is generally established.
- Once the profile is created, it is published so that lenders can start granting their loans.
- In some cases the applicant can review the offers they have and accept one.
- Then the monthly payments and the characteristics of the loan are established.
- Through technology, the platforms enable the transaction.
In different parts of the world, these sites specialize in groups that share certain characteristics, for example, those looking for small business loans.
Characteristics of loans between people
Peer-to-peer loans have some elements that distinguish them from other similar financial products, some of these are:
- Their interest rate is usually between 5 and 25%, they are generally considered low interest when compared to traditional alternatives.
- The amounts that are lent are variable, from being small to quite significant amounts.
- The procedures are simple and fast. Point in favor of technology companies, they eliminate many of the factors that make it difficult for the user to request a loan in a physical space, such as traffic, queues, schedules. Loans between people can be processed from home, if you have a device and an internet connection.
- It is not necessary a guarantee or any advance in p2p credits.
- For the most part, the platforms only allow loans to be processed by people who prove they have a good credit history.
In conclusion, loans between people offer a new alternative to users, it is considered that by breaking the barriers of the banking intermediary, people can access fairer interest rates and, for their part, investors have good rates of return. .