Social Lending: how the Loan between Individuals works


Social lending, also known as P2P Lending, is a particular form of financing, similar to an unfinished personal loan. The distinctive feature is given by the fact that it is provided by private individuals to other private individuals via a web platform.

Social lending in Italy is spreading rapidly, after it was introduced in Great Britain in 2005, to then develop and spread rapidly in the United States. This type of loan is rather useful for those who need a certain amount of money and can take advantage of reduced interest rates precisely because there is no intermediation of banks and financial institutions.

What is social lending?

What is social lending?

Social lending in Italy, or peer-to-peer or private loan is a type of financing in which, thanks to a regulated financial intermediary, it is possible to benefit from a certain sum of money, not by using bank channels.

What are the benefits? Speed, favorable conditions and better rates, precisely because such exchanges of money take place between individuals.

It is also a secure service, in fact companies verify the identity and financial situation not only of applicants, but also of those who lend money. In the event that the customer does not have the opportunity to return the money, the lender is not protected by guarantees.

How does social lending work?

How does social lending work?

Social lending is a service offered by online companies that want to encourage the meeting between requests and offers of personal loans between individuals.

As anticipated at the beginning of the article, the companies involved undertake to use security tools to avoid the risks of insolvency and late payment.

Through specific evaluation criteria, these companies assign each applicant a rating, which reflects the creditworthiness of the customer:

  1. if the client has a low rating, he will have to bear higher interest rates, since the risk to which the creditor is exposed is higher;
  2. if the customer has a high rating, he will enjoy less onerous interests.

In any case, in the event that the payment of an installment does not occur, the intermediary company quickly activates a debt collection program.

Which companies can social lending be requested from?

In Italy there are not many online companies that act as intermediaries between the supply and demand of loans between private individuals, the best known and best known are certainly Capital Lender, Lite Lender and Good Lender Loans : portals that, after having registered and identified, allow you to obtain loans through the web or to grant the availability to provide loans.

By taking advantage of these companies, immediate benefits can be obtained, such as the protection of privacy since your sensitive data will remain totally private.

The advantages of social lending in Italy

The advantages of social lending in Italy

The advantages of this type of loans are mutual because:

  1. whoever grants the money can get a good return;
  2. as well as the money, whoever asks for and receives the loan also benefits from very advantageous interest rates.

Furthermore, there is considerable freedom of action as both the client and the lender can respectively request and invest the sum they deem most suitable.

When is social lending convenient?

Social lending in Italy is convenient when you have not had the opportunity to access the most common forms of bank financing.

Often it is able to offer loans on more competitive terms and with less formalities; in fact, the entire application process takes place online and you will only be asked to provide the minimum information to check creditworthiness. In a few days, it will therefore be possible to get the money you need.

What are the average interest rates of social lending?

The interest rates of loans between individuals mainly depend on the amount requested and the level of risk of the borrower. Consequently, it is difficult to try to hypothesize an average interest. Lend us, for example, it offers nominal annual interest rates, TAN starting from 3.90%, and global effective annual rates, APR starting from 5.40%.

In addition to the interest rates, it is necessary to take into account the fixed and / or variable commissions for each request, which also change according to the user’s risk class. For example, Capital Lender receives between 1.7% and 3.2% for a loan on its own commissions and between 0.35% and 3.5% for a loan as a contribution to the lenders’ protection fund.

Loans between private individuals without interest

In addition to using the platforms already mentioned, it is possible to opt for loans between private individuals without interest, that is, exchanging money between relatives and friends, without applying an interest rate.

However, despite personal relationships, it is always advisable to sign a private agreement, so as to avoid risks and trace the agreements entered into.

Loans between individuals with bills

The last form of social lendin is linked to the loan with bills of exchange, in which the creditor can dispose of the ownership of an executive title that can be spent to assert his rights.