Personal loans are back in vogue during the crisis period. The difficulties linked to liquidity and the difficulty of obtaining funding from the consolidated channels have pushed towards alternative solutions that, however, can hide some pitfalls. Below we will analyze 4 of the numerous risks related to private loans.
Although the exchange of money between individuals by way of lending is one of the oldest forms of financing, the laws and regulations that were introduced with the consolidation of the role of credit institutions have helped to protect the debtor and his family from unpleasant situations and from non-recommendable subjects.
Are private loans legal?
The question is legitimate and shows, in those who ask, a right caution towards the practice of private financing. Loans between individuals are absolutely legal and are regulated by law. For this reason, the granting of sums of money between individuals by way of a loan must have a legal form, in order to be able to enjoy the appropriate protections. Hybrid, discretionary or “housewives” forms are at risk for both parties.
If you are in the situation of having to apply for a loan (especially for large sums) to an individual, who is a relative or a family friend, and the other party does not want to sign a formal act, there is no doubt about his good faith.
Loans between individuals: contact the Social Lending platforms
Social Lending or Peer to Peer Lending platforms provide a “meeting place” between funding supply and demand and are very similar to those of credit institutions, with the difference that those who do not have a credit history at the platform they get less advantageous interests than those who have already obtained loans and have been solvent.
If you decide to pursue the path of P2P Lending, the advice is to opt only for the platforms authorized by the Bank in Italy.
The 4 risks of DIY loans to a private individual
- The friend of his friend is almost always an enemy – All the stories related to the retrenchment start like this: “Do you need money? I’ll introduce a friend who helped me in a similar situation, let’s meet at the bar “. This, most of the time, is the debut of a personal and family tragedy from which one can only go out after years of suffering and serious worries.
- Rates of interest out of control – When the loan between individuals provides for the payment of an interest, the risk is that the rate does not fall within the threshold rates defined by the Bank in Italy. Those who ask for more clearly intend to illegally speculate on the loan.
- Insolvency is also a problem for a family member or a friend – We often resort to family and friends when the sums of money are needed urgently and, perhaps, we have had some stormy spending with the banks. However, being insolvent or delaying payments leads to unpleasant situations even with friends and relatives.
- Attention to whom you provide your data – In the event that a loan is requested from a person who is not very well known or online, we may be asked to provide data for credit checks. Are we sure to entrust our sensitive information to safe hands?
Why rely on a lending institution for a loan
Recognized lenders are a security for those seeking funding. Everything is done according to the law and the practice is managed by qualified personnel. Loans between individuals expose you to risks that can easily be avoided by contacting a bank you trust.