Social loans in Poland appeared about ten years ago and according to experts belong to financial products with high development potential. They are very popular in Great Britain and the United States, so it’s worth learning the principles of their operation as well as the pros and cons of this type of transaction.

Social loans

Social loans

A social (or also social) loan is a transaction concluded directly between natural persons, which is possible thanks to specially created internet portals. In this case, there is no brokering of any financial institutions, and registered users can be either a lender or a borrower, depending on the needs. The website only allows transactions and verifies Internet users who register on the portal, but does not participate in downloading or granting loans. And how does it look in practice? People who need financial support set up an account on a website enabling such transactions, and then they are verified, among others including credit history. After logging in, they can issue notifications containing information about the amount they want to borrow and the purpose they want to spend it on. Users who declare themselves as lenders on this basis can provide financial support.

Social loans via the Internet – pros and cons

Social loans via the Internet - pros and cons

Social loans are granted for a specific percentage and pre-determined period. However, if we compare them with bank loans, they are much more easily available and may prove to be more financially advantageous than products offered by such financial institutions. Admittedly, users are verified during registration, but they are not expected to fulfill as many formalities as in the case of a liability incurred in a bank. It is also worth paying attention to the fact that all details of the transaction are agreed between the parties concerned, which is why borrowers can count on a more flexible approach.

On the other hand, lenders just earn interest. Of course, social lending is also not without its drawbacks. First of all, the persons granting co-financing are not sure that the entire amount borrowed will be returned to them. Rather, you can not count on large amounts of funding, so if you want to borrow larger amounts without waiting for enough people to make them available, you can better use the services of loan companies – in Bruin you can make a commitment of up to $ 15,000. An additional problem here are certain legal restrictions and the lack of explicit regulations. For this reason, people who make social loans can be considered entrepreneurs if this type of business is repetitive. The works of the European Commission and the Polish Financial Supervision Authority are currently underway to remove such restrictions.

Investing in social loans

Investing in social loans

Finance experts agree on one thing – having financial surpluses is definitely better to invest than to keep them on a low-interest personal account. Social loans are a good solution because the principles of operation of platforms enabling transactions are very simple, and in addition, investing can be started even with small amounts, because the total amount of the loan is often financed by several users. Of course, you also have to remember about tax issues – because the interest earned is income, you should settle the tax with it. To find out how to settle social loans, you should check with the tax office. And how much can you earn? During the year, the interest rate is up to 8-14 percent, which in comparison to low-interest deposits or other forms of investment offered by banks turns out to be a very good result. Of course, it’s better to first get to know the product itself and find out what opportunities it offers.

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