Social Lending – an alternative to borrowers and investors

Social Lending – an alternative to borrowers and investors

The market for financial products is constantly changing. This affects not only an increasing financial awareness of those who begin to participate, but also the development of technology, which in turn allows people, who are distant from one another to communicate with each other and transfer money without having to engage banks or other financial institutions. These factors have become a groundwork for the development of so-called social lending, i.e. social lending.

Social Lending – what is it and what does it consist in?

In Poland, social lending is still a novelty, which occupies only a tiny percentage of the turnover of the funds in the financial market. The Idea was spawned in the UK and spread fairly quickly beyond its borders. It also arrived in Poland, where it received quite favourable conditions, although the legislation did not fully know how to respond to it.

Social Lending is a solution that allows you to bypass the financial institution’s participation in borrowing money. There are two pages on a transaction. The borrower can borrow money on attractive terms, somewhat cheaper and more advantageously as compared to the bank, and the lender gains a small percentage owing to the loan grant. It is an excellent solution meant for those, who do not receive a loan in the bank due to too low creditworthiness and for those with more cash, who want to invest for its multiplication. The gains are not staggering, but as always much depends on the level of investment.

In granting and obtaining a loan, a special web portal, which brings together borrowers and lenders acts as a mediator. Some and others are verified during registration. However, particular attention is paid to potential borrowers. The earned money is repaid in instalments, on a basis agreed between the parties.

If a borrower needs a larger amount, the web portal usually organizes a loan from several lenders. In this way, you manage to slightly scatter the risk. Borrowing smaller amounts from several investors is a safeguard for each of them.

How to get a loan?

Obtaining a loan is not difficult and usually takes place in the auction system. The person, who needs money issues his/her ad. The amount of money that is needed, the interest rate and the form of securing the contracted loan are laid out in it..

Investors respond to the published announcement. The lender chooses the best deal and concludes it, and finalises the transaction. Then it is followed only by a transfer of money and a gradual return of the loan.

Investors can also offer their loans. The offer informs you what amount they have at their disposal and can borrow. They determine the interest rate and invite you to use such an opportunity. If the person concerned agrees to a predetermined rule, he/she responds to the announcement and the transaction is finalised. The solution is quick and simple. is an innovation in the social lending investment, why? Because it GUARANTEES the repayment of the loan – it is good news for investors

Every loan in is well secured, the company requires at least 300% security of the borrowed amount and it is only in the form of real estate. also occurs as an investor paying the borrower the entire amount before we put it on the list for further resale and this is good news for investors. Furthermore, in order to receive a loan, in addition to the property a real plan for repayment must be presented...Therefore, all investments on are safe regardless of the guarantees.

In the banking market, most repaid loans are mortgages. The bank lends up to 110% LTV (the value of the loan compared to the value of the property), we do lend up to 35% LTV.

The warranty (indicated by the shield symbol) is an additional security for an investor and includes:

-Repayment of monthly instalments on term
-Reimbursement of capital, including interest, also in the event of termination of the borrower’s contract.

The guarantee covers the total return of capital with interest in the event that, for some reason, it would not be possible to fully settle the debt off the resale of another institution’s rights, to roll over the loan or to sell the property.

The guarantee shall also cover possible formal errors culpable by Europpa as a result of which the loss arose, e.g. concerning the erroneous revaluation of the value of the collateral.

In such cases, Europpa shall pay the whole or the missing amount together with the interest due. The guarantee also includes the timely repayment of monthly instalments, regardless of the borrower’s possible delays, the investor will receive the instalment always on time.

The law firm and the notary office are also covered by insurance against the consequences of any errors. This insurance covers each participant.

Social lending – the future or niche?

As bank deposits do not go up at all, and lending rates definitely do so, it could be assumed that social lending has come upon favourable conditions in Poland. This lender determines what is the minimum that he wants to earn. Below this amount you do not have to agree to borrow your money. Of course, you should calculate some risks in this profit. It can always happen that the borrower will be in arrears with repayment.

At the same time, for borrowers it is an alternative to banks, which even in the case of low amounts, sometimes put enormous demands that are difficult to meet. Here the contract is concluded very quickly and simply, and its rules are all immediately known.

However, this segment is beyond the control of the Financial Supervision Authority, and this causes those lending the money and investors to be in no way protected or their earned income accounted for. These two elements can make the government even more interested in this area too and decide to regulate it by law over time.

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