Banks now have several types of loans available, which are particularly geared to the financing needs of private individuals. This includes, for example, the overdraft facility, the installment loan and the real estate loan. A special form of credit in this context is the personal loan. Nowadays, however, this is used as a term in two ways. On the one hand, the personal loan is a loan that banks grant exclusively to private customers.
On the other hand the designation is meanwhile often used, in order to mark thereby the so-called credit from private. However, this is not provided by credit institutions, but via special platforms of individual investors. In particular, we would like to deal with the second type of personal loan in the following article.
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The private credit of the banks: loans to private customers
Nowadays, some banks sometimes refer to installment loans that they provide for consumption purposes as personal loans. In this case, the loan is granted exclusively to private individuals or private persons. Private customers instead of. Usually, the personal loan is an installment loan that finances consumer spending. Thus, the personal loan from the bank is used as financing especially for the following expenses:
- Buying a new or used car
- Purchase of new furniture
- Car repair
- Renovation house
- Other consumer spending
The opposite of the personal loan, which is provided by banks, is incidentally the business loan. This is given exclusively to business customers, so that they can use the funds to finance investments, for example.
Private credit without banks: the credit from private
The second definition of a personal loan, which is frequently used nowadays, involves a loan without the involvement of banks. Often in the context of the so-called loan from private or a loan to private individuals is spoken of.
In this case, in fact, both the borrowers and the lenders are private individuals. Thus, the personal loan in this function basically returns to the roots, because before there were the first banks a few hundred years ago, it was almost exclusively wealthy private individuals who lent money to other people at interest. Nowadays, however, you no longer have to laboriously search for potential lenders in the private sector, but can instead use one of several platforms.
How does the loan from private as a personal loan?
In summary the private credit is as credit from private thus a loan, which is assigned by private people to private people. In the process, almost always between an average of 10 to 50 lenders face a loan seeker. The function mode of the credit of private begins with the fact that you announce yourselves – either as investor and financier or as credit-looking for – on a special platform. The essential task of such a credit platform is to carry out the processing of the loans and, of course, to bring lenders and borrowers together in the process.
If you look for a favorable financing over this way, you must announce yourselves first on the credit platform and indicate thereby some data. Often, on the part of the operator of the platform is then assessed on the basis of some data your creditworthiness and you are assigned to a certain credit rating class. Subsequently, by means of a published project, you can describe in a little more detail what you need which loan amount for. In particular, it is the following information that is helpful in finding sufficient capital providers:
- Loan amount
- Interest rate
- Intended use
- Creditworthiness (mostly done by the platform)
On the basis of this information, private individuals who naturally want to make money with their money can then decide to provide you with a certain amount of money. Of course, if there are several lenders, you do not have to pay the accruing installment to each lender per month.
Instead, the settlement usually runs through the credit platform, so you pay for the entire loan amount – as is also common with a bank loan – in this type of personal loan a monthly installment. This includes both the agreed interest rate and the repayment of the loan provided.
Private loan as a favorable financing alternative
Now that you know what the characteristics of the loan from private and how a personal loan of this type works, you may ask yourself why you should actually choose this financing option instead of the usual bank loan. The reason may be that such financing, where private individuals act as lenders, can sometimes be cheaper than the bank loan.
This does not apply of course automatically to all private credits, but you should already use the possibility of comparing the offers and above all thereby also bank credits to the credit of private over a platform opposite place. In most cases, the private loan as a loan from private then the cheaper alternative if you have a good credit rating. As already mentioned, the credit platforms assign the respective loan seekers to a certain creditworthiness class, so that the lender can easily see what risk he takes with the lending of his capital.
Often it is even handled by the credit platform in such a way that the respective credit rating class is automatically associated with a certain interest rate. This saves you from dealing with potential lenders, but with the allocation to the appropriate credit rating class is automatically determined what interest rate you have to pay for the loan. With a good credit rating, the personal loan is not infrequently cheaper than an installment loan from the bank. However, this cannot be generalized, especially against the background that even the bank's normal installment loans can be had at very favorable interest rates these days. There, too, it is often a creditworthiness-dependent interest rate that is assessed by the respective lender.
Higher chance of getting a loan with a mediocre credit rating
The possibly more favorable financing can be an advantage, with which the private loan is equipped via the credit platform. Another advantage is sometimes that the chance of a positive credit decision is higher than with banks.
Why is that? The functioning of the loan from private means that usually several private individuals raise a part of the desired loan amount. If, for example, you need a loan amount of 10.000 euros, it may happen that a total of 25 financiers can be found, each of whom is willing to lend you 400.
For the individual lender the financial risk is then naturally substantially smaller, than if you use a bank credit and the credit institute you the full 10.000 euro must lend. Due to this mechanism, the chance with a loan from private is often higher than with a bank loan that the loan is actually paid out. Furthermore, the lenders of course have an additional incentive to lend money due to the higher interest rate resulting from a mediocre or even poor credit rating and thus achieve a very good return on investment.
The private loan from the point of view of investors
Loans from private help on the one hand credit seekers to be able to realize the appropriate financing. On the other hand, investors are of course necessary for the functioning of these loans. These replace the banks, which are otherwise often responsible for lending. The investors, in turn, are often private investors who invest an average of between 200 and 2.000 euros would like to invest, if you calculate this down to the individual credit project. For this reason one should consider with the credit from private not only the side of the borrower, but likewise on the important capital givers, the investors, deal.
For example, the question arises as to why investors choose such loan financing in the first place instead of ordinary financial investments, such as fixed-term deposits, shares or funds. One answer to this question is certainly that it is possible to invest even smaller amounts without any problems. With most personal loans, investors can lend money from as little as 100 or 200 euros.
This results in another advantage, namely that so a very good risk diversification is possible. For example, if you want to invest a total of 5.If you want to invest more than EUR 000, you can lend the money to 20 different credit seekers, for example, and thus reduce your risk of major defaults or losses. Losses occur. In addition, there are certain safeguards on most credit platforms, which ensure that it is relatively unlikely – at least in certain creditworthiness classes – that defaults will occur. Thus, the loan from private investors on the one hand quite a profitable investment, but on the other hand a comparatively safe investment.
In the overview, it is in particular the following advantages by which personal loans can distinguish themselves from the investor's side:
- Good return
- Acceptable security
- Flexible investment
- Risk spreading problem-free possible
- Already from small investment sums
Is there the private loan via credit platforms even with negative SCHUFA?
A frequently asked question consists concerning the credits of private in it whether the loans are assigned over the credit platform also if the credit-looking for has a negative entry in the SCHUFA. Here there is quite a smaller difference to the bank loan, because with german banks it is almost always in such a way that a negative SCHUFA characteristic leads automatically to the fact that the credit request is rejected. With the credit from private this does not have to be necessarily the case.
As a rule, the credit platform classifies the respective investors admittedly in a certain credit rating class. On the other hand, ultimately the investor decides for himself whether he is still willing to lend his money in the case of a higher risk, which is caused, for example, by a negative SCHUFA feature. For this reason, it can happen that you get a private loan even if you have a negative entry in the SCHUFA. Basically, the chance is then greater than if you decide to apply for a loan at the bank.
Frequently asked questions about the private loan (credit from private)
Since the credit from private is by far not known to all customers who are looking for financing, questions arise more often in this context. We would like to answer some of these frequently asked questions (faqs) below.
What amount of credit can I apply on a credit platform?
The fact that the private credit, which is assigned over a credit platform, is very flexible, shows also the width of the possible loan sum. Basically, you can – of course depending on the determination of the respective credit platform and your creditworthiness – within a wide range, which often starts at 500 euros and up to 100.000 euros can be enough, borrow money.
Even large loan sums can often be realized because numerous investors with smaller sums join forces in a certain sense to finance the respective project. Accordingly, the loan from private is ideal for financing consumer spending, which is usually in the range between 2.000 and 20.000 euros move.
Do I have to provide collateral for a personal loan?
As a rule, the personal loan, which comes about through credit portals, is a blank loan. This in turn means that you do not have to provide collateral, but you will receive the loan amount without any special conditions. Sometimes, however, it can make sense to offer loan collateral, because then more investors may be willing to put up money.
Which is more favorable: bank loan or loan from private?
This question cannot be answered in a general way, because nowadays there are very favorable bank loans as well as inexpensive loans from private sources. In both cases, creditworthiness often plays a decisive role in whether the loan will be favorable or rather expensive for you.
This is almost always the case with personal loans, because almost all credit platforms classify their customers in a creditworthiness class. In the case of bank loans, it depends on whether or not the credit institution charges an interest rate based on creditworthiness. If this is not the case, you may well be able to obtain financing at interest rates of two or three percent even with a mediocre credit rating.
Is the personal loan also suitable for business customers??
The term personal loan, as it is used in the form of credit from private through special credit platforms, refers more to the lender than to the borrower. In other words, while the lenders are almost always private individuals, on the part of the borrowers there are certainly also companies or self-employed people who are looking for suitable financing. In this case, a so-called crowdlending platform is often used, on which precisely also tradesmen as borrowers can find suitable financing.
What is the term of the loan from private?
As the loan amount and the interest rate, so you can agree on the loan from private also the term with the respective investor freely or. Within your project description determine. Above all, you should make sure that the monthly installment is affordable, so that the term should fit the loan amount and, above all, your economic circumstances. So, for example, if you need a financing amount of 10.000, a term of only twelve months is probably too short, because the monthly installment would probably be difficult or impossible to bear.
It is best to create an income and expense statement, because then you know what disposable income you have per month and thus at the same time, what loan rate would be sustainable. This in turn then determines the term within which you repay the loan from private.
Can I use the private loan to pay off a bank loan?
A positive feature of the loans from private is also that almost any purpose is possible. In other words, you are free to decide what you want to use the loan amount that you collect from the investors. It follows that you can, of course, use the disbursed personal loan to pay off another bank loan, i.E., to reschedule debt. However, such a measure only makes sense if you can obtain the personal loan at more favorable interest conditions than is the case with the current bank loan.