Archive April 2019

P2P loans (lending people to each other): what is it and is it possible to use it

P2P economy (when people buy goods and services directly from each other without intermediaries) in the modern world is gaining momentum. Previously, this tricky foreign word could be called a situation where a bunch of onions were bought not from a supermarket, but from a grandmother at a market. Now, in connection with the improvement of communication technologies via the Internet, P2P economy has received an additional impetus to development.

After all, this is nothing more than a platform where people can buy any goods from each other (from t-shirts to wardrobes), used cars, rent or buy an apartment, and order a service (freight, tutoring).

Today we will talk about P2P lending services. These sites offer people the opportunity to take a cash loan not from a bank or an MFI, but from another person. Do such services exist at all, what progress have they achieved, what problems do they face?

The emergence of P2P lending

The emergence of P2P lending

The first online credit service for citizens of each other appeared in the UK in 2005.

The idea of ​​mutual lending through the Internet is very simple. The online service is designed to attract investors and borrowers, to determine the degree of risk of lending to potential customers , to make cash transactions.

At the same time, the website has no such expenses for maintaining a network of branches and paying staff like a traditional bank. Therefore, the P2P platform has the ability to offer the borrower a loan at a lower interest rate. And an investor who provided money to the service, as a result, will receive a greater income than from placing free funds on a bank deposit.

Mutual lending services began to grow rapidly. The services of the same Zopa. com 7 years after the start of the project (in 2012) used more than 500 thousand Britons . The total amount of loans issued by this site has exceeded 200 million pounds .

The success of P2P projects in the field of lending

Issues in mutual lending

The rapid pace of new types of lending began to develop in the United States. The largest American P2P lending platform called Lending Club began its work in 2006. As of 2012, over 115 thousand loans totaling more than $ 1.5 billion were already in its service.

What caused such increased interest of investors and borrowers to new projects? The average rate on consumer loans in the United States for borrowers with a good rating ranges from 11 to 15% per annum. And if an ordinary American on a P2P site can get a loan at a rate 0.5% lower than at his bank, he will feel as if he won the Olympics.

Cooperation with P2P platforms is also beneficial for investors and investors. The rate on bank deposits in the United States is about 1% per annum. Placing money on mutual lending sites brings investors up to 10% income.

But at a particularly rapid pace, the P2P lending market began to develop in China. The first Internet platforms connecting investors and borrowers appeared in the Middle Kingdom in 2007. And by 2016, there were more than 5,000 such online sites . For comparison, let us cite the following figures: in the UK (in the homeland of P2P lending) there are about 100 sites of P2P loans, in the USA – about 300. The total amount of loans issued by individuals to their fellow citizens in China in 2015 was more than $ 52 billion .

The reason for such an interest in obtaining loans through the Internet is that Chinese banks simply cannot afford to lend to the vast population of their state. For people living in the Chinese hinterland bank lending is inaccessible. The only possible option for obtaining the necessary loan for an ordinary Chinese was an appeal to the Internet service.

Thus, by 2016, the impression was that citizens’ lending to each other would greatly press traditional banking services on the market.

Issues in mutual lending

Issues in mutual lending

However, the seemingly attractive projects for lending to each other by citizens also revealed pitfalls. The new field of activity was not regulated in any way by the law and the state , which created the basis for numerous abuses .

In the US, a bolt from the blue took place in 2016, when the founder Renault Laplanche was fired from the Lending Club. It turned out that he and his family members themselves took loans from their organization through a special investment fund in order to improve the statistical indicators for investors. In order to correct statistics and demonstrate the growth in the number of loans issued, many loans changed the date of issue.

 

After the scandal, the company’s shares collapsed by 50%, and investors lost confidence in such projects . Of course, there are still P2P lending sites in the USA. But they are considered, for the most part, as a modern method of attracting customers to the use of traditional banking services.

Not the best way things turned out for P2P-services in China. So, in November 2015, the Chinese site Rong Zuan Dai managed to attract several hundred investors’ money to the promise of paying high interest, and disappeared in a couple of weeks. Another well-known project turned out to be a banal financial pyramid. The loans that he “issued” to borrowers turned out to be fiction. In fact, the owners of the site paid interest from the funds contributed by the second and third waves to the first wave of investors. As a result, the project predictably collapsed. At the same time, 900 thousand investors suffered, cumulatively investing about 11 billion dollars in the site.

In 2018, China even held street protests of investors deceived by the P2 P-platforms . As a result of the outflow of investors from 5,000 sites, only 1,500 sites remained active. And the Chinese government was forced to regulate the market for P2P loans.

P2P lending in Russia

P2P lending in Russia

In Russia, mutual lending to citizens has not received such development as in the UK, the USA or China. The account of sites where ordinary people offered loans to each other , went not on thousands or hundreds, but literally on units .

Solvent and disciplined citizens of our country are accustomed to issue loans in banks at an acceptable rate of 15-19% per annum. Potential customers of the first domestic online services of P2P loans were the same people as borrowers of numerous MFIs. These are either citizens with a low level of income and a large number of existing loans (and, accordingly, with a high risk of non-repayment of the loan received). Or cunning, who initially were not going to give money easily received through the Internet.

Young Russian Internet projects did not have effective tools for determining the level of reliability of potential borrowers and returning unpaid loans. Investors of Russian P2P services quickly faced a high level of loan defaults.

The return of the funds lent through the court turned out to be a very lengthy and troublesome procedure. And a few years after the start of operation of such services, private investors were completely disappointed in them.

So, one of the first Russian projects on P2P-crediting opened with the assistance of the well-known Internet portal. The project was founded in 2010. The site has not issued loans since 2016. The reason is the increased level of defaults (non-repayment) of loans.

Service retrained in the usual ICC with loans at 1.5% per day and tough ways to work with overdue microcredit. The threshold of entry for private investors into this organization has increased from 50 thousand rubles to 1.5 million.

In general, P2P economy is developing. However, the idea of ​​mutual lending by citizens of each other in practice faced serious problems. Among them are:

  • the absence of a legislative base and control by the state, and, as a result, the presence of serious abuses;
  • unavailability of mechanisms for checking borrowers on solvency;
  • the complexity of the procedure for collecting arrears.

At the moment, we are not able to recommend you a P2P lending service, in which you could borrow money from a private person at a lower percentage than at a bank. These innovative startups have not yet succeeded in replacing the conservative but reliable banking system. So, if necessary, you should best apply for a loan to one of the well-known Russian banks.

What to do if there is nothing to pay a loan: useful tips

The situation when there is nothing to pay a loan for, for many Russians, alas, is a reality. What to do when debts multiply like a snowball, all the phones cut off collectors with threats, and banks start calling friends and relatives to pay off their debts? If you look at everything, it turns out that many of the described actions of creditors are illegal, and the payer has very real chances to get a convenient debt restructuring.

Negotiations with creditors

If there is nothing to pay a loan, then the first thing to do is contact the banks you owe. Do not pull up to the last and come to the office on the day of payment, or even a week after the delayed admission. The bank is interested in the return of money no less than you. And if you apply in advance, you can find many quite acceptable options for getting out of an unpleasant situation.

So, the most obvious and simple are the following options:

  • Negotiations with creditors is the first thing to do in this case.

    credit holidays – deferred payment for an optimal period until the borrower has money;

  • granting of a “grace period” – for example, paying only interest or, conversely, a loan body within 2-3 months;
  • reduced payments — for example, making only half of the debt this month, and 1.5 times the size of the regular payment next;
  • postponement of the payment date – for example, a few days later, if the enterprise has changed the date of salary issuance;
  • refinancing a loan with the ultimate goal of reducing the monthly payment – most often by increasing the repayment term (for example, from 5 to 7 years).

It is better to apply at least a week before the next payment. The bank will have time to consider many different options and make a mutually beneficial loan repayment decision. It is also important to know what will happen if you do not pay the loan at all?

In order to be convincing when talking with the loan officer and the head of the department, you should attach documents showing your financial distress and that you have nothing at the moment to pay the debt. It can be a variety of papers, for example:

  • a reduction order and a copy of the employment record with a corresponding record;
  • birth certificate of the child;
  • death certificate of the co-borrower or a close relative, at whose expense the debt was partially repaid;
  • the claim in court and the application for suspension of work, if the employer delays the salary;
  • certificate of disability;
  • an extract from the medical record, indicating that a serious illness has occurred in the borrower or an expensive operation has been conducted, as a result of which his working capacity is temporarily limited;
  • documents on damage to income-generating property, such as a rental car.

It is good if you have not made a single delay before contacting the bank and have been paying the loan for a long time. In this case, employees are more willing to meet you, especially if you confirm the reason for your temporary insolvency.

But even if a few delays were made on the loan and fines began to “drip”, then there is no need to hide. Negotiations (or at least a demonstration of readiness for them) is the first step towards establishing normal relations. It is possible that the bank, seeing your willingness to pay the loan further, will make concessions and write off the accrued interest. During the negotiations, you can achieve a more convenient payment schedule.

Loan refinancing – a simple way out of a difficult situation

Loan refinancing - a simple way out of a difficult situation

If your financial condition is shaken only temporarily, and there is a chance that everything will be restored, then it is advisable to do a refinancing of loans. Simply put, it is a collection of many small payments to one. If you perform this operation correctly, you can get a lot of advantages:

  1. The interest rate decreases, and with it the overpayment.
  2. Reduced monthly payment.
  3. You can choose a convenient day to pay off.
  4. Instead of multiple payments, one.

The most convenient way to refinance is to find a special program in a large federal bank. The institution’s specialists will help you collect all the necessary documents and negotiate with third-party banks. In fact, you will close all other debts with a new loan and you should remain with only one organization.

Despite the fact that outwardly such an operation looks tempting, not everyone is able to achieve refinancing. To obtain bank approval, the borrower must meet strict requirements:

  • not have a single delay on current loans;
  • his income should be enough to service the new payment;
  • It is necessary to provide the same security as under the terms of the previous agreement.

Thus, refinancing, in the understanding of banks, is the granting of a loan to a trustworthy payer, and not “rescue of drowning people”. Debtors in most cases, approval does not shine.

Another thing is re-lending, i.e., renegotiating the terms of a valid loan. As a rule, this is an extreme measure for debtors who find themselves in a difficult life situation. Most often, the loan term is simply extended to reduce the monthly financial burden. Sometimes the bank goes for the forgiveness of fines or allows you to pay them later, if there is nothing to pay now.

Another way is to make independent refinancing. Simply put – take a new loan on the best terms and pay off all existing debts. Here it is important to take into account a number of points:

  • if you have so many loans, then the new loan may simply not be approved, so you will have to either confirm the presence of additional income or issue a loan to a third party;
  • it is worth taking a new loan if it is cheaper than the old one by at least 2 percentage points, otherwise it is simply not profitable;
  • the loan must be taken for the same period as it remains to pay as before – otherwise, with an external decrease in load, the actual overpayment will be more;
  • repay first and foremost credit cards and loans with a rate above 33% per annum, regardless of their size;
  • Please note that you may have to take out insurance – order the amount of the new loan a little more than necessary.

Re-lending issues should be treated carefully. The slightest mistake can cost a lot of money, and instead of reducing the credit load you get even more debt.

How to deal with collectors?

If you have not paid the loan for a long time, and collectors are attacking you, then it is too late to negotiate with the bank. Your goal is to build a competent interaction with those to whom the credit institution transferred your debt.

First, it is necessary to clarify how legitimate the “sale” of debt is. Usually all the rules of the transfer of obligations prescribed in the contract. Without notifying the borrower, banks are not allowed to do this.

Secondly, you need to know whether the transfer of debt occurred, or the bank simply “asked” collectors to influence the debtor psychologically. Sometimes the borrower may be called bank security service, seeming to be collectors.
Thus, when you contact the collector you need to know a lot of information:

  • his name and position, the name of the organization he represents;
  • loan agreement number and the name of the bank that “sold” your debt to it;
  • total debt and monthly payment;
  • details for the payment.

The data provided by the collector must match the data in your copy of the contract. Collectors do not have the right to increase the amount of payment due to fines or change any conditions: to increase the interest rate, to renew the contract, etc. If you have already transferred the debt to the collection agency, then they have the right to charge only what is provided for by the current credit contract. They want more – let them make another agreement with you.

With regard to information about the agency and its details – it is necessary to verify the organization. Sometimes it turns out that debts are demanded by people who have no relation to collectors or banks.

In most cases, the callers behave in a boorish way, threaten, call space fines. It is recommended to record the entire conversation on the recorder with prior notification of the collector – then they behave more decently. You need to know that the law protects you, and collectors can not:

  1. Threaten you personally or your family – criminal liability is provided for this, which you can notify the caller about.
  2. Insulting you – for this, too, provided an article.
  3. Require additional amounts – penalties and interest for the use of the loan, and so spelled out in the contract, no one else can get from you.
  4. Require immediate repayment of debt, otherwise threaten with the withdrawal of an apartment, material assets, a ban on traveling abroad, etc. – if you are obliged to pay, then only under the terms of the contract, and the court decides all matters related to confiscation and bans but not a collector.

The best way to talk is this:

  • quietly listen to the collector;
  • find out all the information about it;
  • report the inadmissibility of threats;
  • refuse to pay the accrued fines, but agree to pay the debt;
  • propose to resolve the issue in court.

Similarly, you should act if you call from the security service of the bank and threaten to confiscate property. First of all, it is necessary to propose to settle the conflict before the trial by refinancing. In case of refusal, you must send a revocation of the permit for the processing of personal data to the bank by registered letter (then the institution will not be able to transfer the debt to anyone), as well as a repeated offer for the pre-trial settlement of the dispute.

Attention: if the contract specifies collateral, such as an apartment, the bank may well have it at its disposal for failure to pay the loan. However, this cannot happen arbitrarily, but only by a court decision.

Going to court

This is what you should strive for if banks and collectors overdone their threats and fines.
If your loan was handed over to collectors, then the court is the only way to achieve a favorable outcome of the situation. Collectors, while threatening such proceedings, are in fact afraid of court hearings. In many cases, they end up with the fact that all debts are written off from the borrower, and the amount of payments on loans is determined in the amount of no more than 40% of his income.

You can not wait until the bank goes to court, and act proactively. In this case, it is you who will dictate the terms of the future loan restructuring. Freed from paying the debt, definitely, will not work, but it will be possible to produce it according to a convenient scheme. Be sure to demand the cancellation of fines and penalties, especially if their size has already exceeded the amount of debt.

Reassure the judge that you do not refuse to pay the loan, but are temporarily unable to do so. Attach the documentary evidence of your temporary disability, show that you tried to negotiate with the bank and collectors before filing a claim.

How to save property if you have nothing to pay?

How to save property if you have nothing to pay?

If the amount of debt is impressive, and you have nothing to pay, the bank can send a penalty to your property. Therefore, in order to protect your apartment, car, household appliances, etc., you should prepare: 

  • find at least some work to show the presence of permanent income;
  • try to accumulate the maximum amount in cash so that you can pay off part of your debts and not pay off your property;
  • give expensive property to someone from close relatives or friends;
  • Prepare evidence that the property is the tool through which you earn money (for example, you earn money as a private cab driver or freelancer using a computer and printer).

Consider a number of points:

  • any transactions during the year preceding the court session may be challenged and declared null and void if the court decides that you deliberately dispose of the property;
  • the apartment, which is the only housing, can not take away;
  • they cannot take away also personal belongings, children’s things and objects of a specific purpose necessary for life activity (for example, medicines, wheelchairs, etc.);
  • property is sold at auction at prices well below average, so if you don’t need something, it’s better to sell it before the process and close some of the debt.

Do you need bankruptcy?

Do you need bankruptcy?

With the issuance of the law on bankruptcy of individuals, many debtors, if they have nothing to pay the loan, have wished to take advantage of the new opportunity. You have to decide if you need it. Bankruptcy is usually the last resort when the amount of debt exceeds all reasonable limits, and the payer has no way to pay it off. In addition, such a measure can be applied to individual entrepreneurs who are responsible for their obligations with personal property.

Bankruptcy does not mean debt forgiveness. If a person is declared insolvent financially, then all his property, including an apartment and transport, will be sold to maximize the repayment of loans. First of all, the pledged property, cash and securities will be seized.

In addition, the bankruptcy procedure itself involves a lot of costs: for the arbitration manager, for holding an auction, for appraising property, etc. The bankrupt will need to pay them at his own expense.

After the termination of the process, the impoverished citizen will be subject to certain restrictions for the next five years. So, he will not be able to:

  • get a loan or act as a guarantor;
  • set up a company or open a bank account for individual entrepreneurs;
  • hold a management position;
  • enter the military or civil service;
  • travel outside the country.

It is much easier and more expedient to agree with creditors on a mutually beneficial debt settlement scheme. If the world did not work, then in court. But it is better not to declare bankruptcy.