Social lending is a personal loan that allows the disbursement of a sum of money by private subjects (called investors or creditors) in favor of other private subjects (debtors), without requiring the intervention of banks or credit institutions. In fact, the aspects that distinguish these loans from the traditional Captains concern precisely the lack of involvement of credit institutions and the direct contact between private subjects, made possible by the use of specific digital platforms.
For these reasons, these loans are also called ” Captain among private individuals “, ” Social Captain ” or ” Peer to Peer Lending “. The phenomenon was born in Great Britain in 2005 but quickly spread in the rest of Europe and also in the USA, gaining considerable success also in Italy.
How do personal Captains work between individuals?
In the Captains between private parties the contact between the parties and the subsequent disbursement of the requestead sum takes place through the use of specific online platforms, which perform an intermediation function. The absence of infrastructures and intermediary figures guarantees the adoption of much more advantageous financing conditions than those provided by the traditional Captains: with lower interest rates and lower expense items.
To access these platforms – both as investors and debtors – it is necessary to possess the requisites that, in the specific case of debtors, must confirm a good level of financial solvency, or the ability to return the sum received. These financing solutions require each applicant to be assigned a rating, or a score that can indicate the level of creditworthiness. Based on this indicator, the interest rate and other conditions of the requested loan will be chosen.
How is the requested sum paid out?
The payment of the money takes place only after a careful evaluation of the documentation presented by the applicant and only in the event of a positive outcome of his financial position. The amount requested is never provided by a single entity but distributed among several investors in order to reduce the risk component. Instead, the debtor will reimburse the sum received through the payment of a single installment, in most cases on a monthly basis. It will then be the task of the same platform to return the sum paid to the various investors.
What are the advantages of social lending?
The main advantage of social lending concerns the application of lower interest rates and the lower number of expenses. In fact, direct contact between the parties and the lack of intermediaries guarantees the adoption of more advantageous conditions. The debtors can then request the desired sum and return it by paying the most advantageous repayment installments, without incurring penalties in the event of early repayment.
The advantages of this operation are reciprocal : the person who gives credit, in fact, can obtain a good remuneration, while the one who receives the loan benefits from interest rates less onerous for the restitution of the sum granted. Social lending is a guarantee of great freedom of action: everyone can request a personal captain to finance any type of purchase or project and every financier can freely decide how to invest their money.
Social Lending in Italy?
The Captains among private individuals have also been successful in Italy where to operate it is necessary to be registered in the list of financial intermediaries and obtain the appropriate authorization from the Bank of Italy. At the moment in the Italian credit market there are four digital platforms: Smartika, Prestiamoci, Soisy and Borsadelcredito. To these was added in 2017 the French company Younited Credit. According to data released by the crowdlending observatory of the Politecnico di Milano only in 2014 – 2015, digital platforms raised around 7.5 million euros from investors.