Borrowing Your Own Money – Investing in P2P Loans

Let’s leave morality aside, there are many people in the Czech Republic who desperately need money. If they are registered in the bank register, they cannot go to the bank with the application.

If they are registered in the Good Finance register, they usually do not have a chance with any non-banking company. And only private individuals remain. What to become one of them?

1. I want to lend my own money myself

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1.1 It is convenient and worthwhile

The market situation is as favorable as possible. Demand far exceeds supply and many bidders are rejected. As already mentioned, they need not be indebted people in execution.

The mere fact that a person is registered in the register is sufficient reason not to get help anywhere.

The same situation occurs when a person has gone through insolvency proceedings (personal bankruptcy). For the next 5 years, it remains in the insolvency register and is marked as very risky for banking and non-banking companies – even if it owes nothing. And no one will approve it.

1.2 What you need to do

On 1 January 2011, Act No. 145/2010 Coll., On Consumer Credit and on Amendments to Certain Acts came into force, amending, inter alia, Act No. 455/1991 Coll., On Trade Licensing (the Trade Licensing Act). And this one requires for mediation or loan:

  • (a) secondary education with a school-leaving examination; or
  • (b) a retraining certificate or other evidence of professional qualifications for the work activity issued by a facility accredited by the Ministry of Education, Youth and Sports of the Ministry; or
  • (c) 3 years’ professional experience

1.3 Where to find a candidate

Given the situation, this is the simplest point.

You can advertise in internet advertisements where there are both offer and demand sections – you will address the offer directly to the interested person. or you can respond to as a request.

The advantage is that they usually describe their situation in great detail. There you can choose a borrower that will meet your criteria.

Other options are using posters on the street. Almost every column has a quick loan offer – just from a private individual. Ideally, they are virtually free.

Newspaper advertising is already more expensive and competition is greater. Therefore, getting to the most carbon-intensive applicants is already more difficult.

All money invested is properly covered. The vast majority of investors require property guarantees. As a result, they are willing to accept clients who use the borrowed money to repay another loan. Banks reject these practices.

1.4 Ideal savings for investment

The private sector needs savings of millions. But this can be bypassed.

The first way is to move your interest into the P2P loan field. Investments from as little as USD 10,000 are sufficient here. Alternatively, stay in this business and focus on smaller amounts.

In recent months, an SMS loan has been gaining popularity – the ability to borrow money before payday. Amounts between $ 50 and $ 500 are available.

This implies that there is room on the market for smaller investors who do not have free millions. Although there is a very high APR, it is necessary to count on automation. For 1000 USD borrowed is usually an increase of about 50 USD to 100 USD.

1.5 Disadvantages of investment in loans

The disadvantages are very contradictory. If the money is deposited with the bank, it bears little interest but is immediately available. They bear high interest on this investment but are not available when needed. The availability here is a contradiction.

For investments, money is always given away and is not foreseen in an emergency. So unavailability is not too strong as an argument against. The same applies to P2P loans.

  • Non – repayment – small loans account for 8% of non-payers, for higher loans up to 14% of non-payers
  • insolvency – he would be required to repay at least 30% of the debt over the next maximum 5 years
  • statute of limitations – if the obligation is not acted, it is statute-barred after 4 years (unless stipulated otherwise by the contract)
  • Death – heir has 30 days to renounce the inheritance (including property)

2. Peer to Peer Loans – P2P

Attention – this system came to us from abroad – the UK and the USA. It works in a different way in these countries and the Czech versions are different. Abroad, it is more about investing, very similar to shares.

You buy, sell and trade-in loans. In the Czech Republic, these services will bring together creditors and applicants. And no more transactions allow.

Claims cannot be sold and purchased. It is, therefore, a very different concept, albeit under the same name P2P (peer to peer).

2.1 How much loans work

They work in such a way that the borrower makes a demand. For example, it will ask for USD 200,000 without collateral, proof of income and no guarantor.

You can offer him for example from USD 10,000 up to the total amount of USD 200,000. If you offer the full amount, he will accept it and the deal is closed. If you offer a smaller one, you are waiting for more offers and reaching the full amount.

If the deal is closed, then everything goes through an intermediary. Which one hands over the money and ensures all legal protection.

At the same time, it also takes care of the recovery of installments and the redistribution among creditors (investors). These receivables cannot be traded according to how advantageous the trade seems (repayment, repayment, defaulter) – a fundamental difference from P2P abroad.

2.1 Investor requirements

There are basically none. Just have money.

2.2 Where to invest in Peer to Peer

There are two established and verified portals in the Czech Republic (under the supervision of the CNB)

2.3 Possible risks associated with P2P

Unlike personal lending, risks are spread among multiple investments. You give only a part to each applicant and invest in more trades.

Non-payment, insolvency, the statute of limitations, inheritance – the same as in the first case, only the statute of limitations is treated here when the intermediary company will solve everything in time.

Company crash – the new problem is growing. What if the company through which you invested goes bankrupt?

Since she concludes contracts with debtors, she has all the documents and everything is bound to her name. Abroad, similar crashes have already occurred. And investors have lost all their money.

3. Conclusion on investing in loans

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All the facts have been presented to you. Evaluation and conclusion are already on each individual. On the one hand, there are high returns. But these are associated with risks at almost every step.

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