Social loan platforms can undoubtedly be called the fruit of the dynamic development of the Fintech sector. Many specialists announced the end of the era of social lending in Poland, before it even settled down. The lack of specific legal regulations is just one of the problems that pose a risk to both the borrower and the investor. Are social loan platforms secure? Let’s see!
Social loan platforms
Along with the development of technology, new products began to appear on the financial market. These include not only non-bank online loans, but also social lending popular in other European countries. A characteristic feature of this financial service is the omission of any intermediary in the borrowing process. No banking or non-banking institution participates. The investor stands on one side and the borrower on the other. This gives the opportunity to adjust the terms of the contract in such a way that they are beneficial to both entities. It is worth noting that both individuals and business owners can grant loans. Similarly, there are no restrictions on people interested in borrowing money.
In contrast, social loan platforms are used for communication between the investor and the potential borrower. They can be called a meeting place for people in need and those who want to help. Everything may seem perfect until now, but is it really? Speaking of no restrictions, a red light should light up in our heads. There are no jokes with our financial decisions, and any help can cause us additional problems. What is the risk associated with social loans?
Social loans and non-bank online loans
Most often, people in the face of the financial crisis are looking for the fastest and most advantageous way to get the missing money. In this situation, it’s easy to make a mistake. It happens that clients who do not know the operating model of loan companies identify social loan platforms and online non-bank loans with each other. However, the only common feature of these products is making them available on online platforms. As has already been mentioned, we contact the investor directly when applying for crowdfunding.
Usually, after placing an ad on the appropriate page, you should wait for the investor to contact us. Why is the lender called an investor? There is one reason. By making a loan, he invests his capital in us. Then, as customers, we return the money borrowed with interest, which is pure profit for him. Of course, we set the initial interest rate, indicate the amount needed and propose a repayment date. However, the conditions are negotiable in subsequent stages, and the lender counts on the highest possible earnings. At this point, we must remember that the costs associated with the loan or the consequences of late repayment are not regulated in any way. The Civil Code only covers definition issues and informs you in what situations we should draw up a contract. However, in the case of non-bank loans, their operation is subject to the Anti-usury Act. The company has no complete freedom in calculating additional fees or interest rates. This problem is best presented on the example of the Twisto platform. Let’s check how it works!
Social loan – deferment of repayment
New companies providing online financial services appear almost every day on the Polish market. Some are native projects, others have been moved from neighboring countries. Twisto is among them since July 2018. It is a Czech fintech that found support at ING Bank Śląski, and its services consist of deferring payments for online purchases by 21 days. The fact that the company cooperates with a Polish bank should reassure us of the generosity of the project’s creators. However, doubts arise when we learn about the system of costs associated with late refunds.
Most of us know this model even from the PayU platform, which allows us to use the “Pay later” function. As a result, we pay money for purchases only after 30 days. Why is this service not questionable? It was created in cooperation with the Monedo Now lender based on loan principles. This means that all costs are subject to the regulations contained in the Anti-usury Act. As a result, interest on delay can be equal to a maximum of twice the statutory interest, i.e. 14% per annum. Additionally, non-interest costs may not exceed 25% of the total loan amount and 30% of this sum on an annual basis. On the other hand, Twisto’s activities – although deceptively similar – are not subject to the Loans Act.
Social loan – what is the risk?
Postponement of repayment via Czech fintech for the first 21 days is completely free, which is similar to the almost standard lack of fees when taking payday loans in non-bank companies. What additional costs does the Twisto model assume if we are late with paying the debts? As we can read on the company’s website, a fee of up to PLN 10 will be charged for the first day of delay. For the next five days it will already be PLN 20. As a result, after 41 days of delay, 50 PLN will be added to our bill. However, the so-called The asterisk is also the fact that in some cases these costs can be up to 50% of the order value, i.e. the amount invested by Twisto. In turn, if we do not settle the debt within 46 days, the case will be referred to a debt collection company. As you can see, the fees far exceed the statutory maximum interest for delay.