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Personal loans

Crowdlending: P2P lending explained in simple terms

Crowdlending is a practice of lending that takes place between two parties directly, without the involvement of a bank. 

There are three different types:

  • Lending to private individuals (P2P or B2P)
  • Lending to businesses (P2B or B2B)
  • Lending/investment to finance property

In the case of property financing, the parties on both sides can be private individuals or businesses.

Crowdlending platforms give lenders and borrowers the opportunity to request financing or invest in projects. The number of platforms and the proportion of professional investors involved has been rising continuously in recent years.

As with conventional loans, profit is generated by the application of interest on the money loaned or invested. The platforms themselves are financed by fees.

The most well-known process in crowdlending is the auction process, in which multiple lenders invest an amount chosen by themselves to cover a portion of the requested loan.

As of 1 April 2019, crowdlending platforms are also subject to the Consumer Credit Act (KKG).

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