Loans continue to enjoy increasing popularity. In this article we show you risks, providers, tax considerations and our own experience with loans.
Direct lending by individuals to other individuals – bypassing banks – will continue to grow in popularity. For example, the global market for P2P loans is projected to grow by just under 25% a year by 2022. That’s neat!
But that does not seem like a miracle at first sight. The advantages for lenders and borrowers seem to be equally obvious.
While borrower lending is often easier than that of regular banks, the lender has higher interest rates than the savings account and (felt!) Greater transparency than investment funds or other investment vehicles.
For those of the credit picks that can interest be already very high at times. This can further aggravate an already tense financial situation. It is therefore worthwhile for future P2P borrowers to look more closely at the interest rate .
The investor in turn pays the significantly higher interest rates (compared to the savings account) but also with significantly higher risks. Because a savings book is in Germany thanks to deposit guarantees (plural!) Almost risk-free. On the other hand, the default rate of borrowers of P2P loans can be significantly higher.
Loans – our own experiences
On average, more than one out of every three borrowers during our lifetime fall out of our own experience with P2P loans. And even with a good credit rating and a wide spread.
That’s basically no wonder. It can be assumed that many of the potential creditors on such platforms for P2P loans have already tried to get a loan from a “normal” bank. And if the bank has not approved this loan , it will be because the prospect has a high theoretical default risk.
Numbers do not lie and statistics do not – especially if you have a meaningful population.
It has to be said that many of the P2P credit platforms have a tight dunning system, and therefore were relatively fix on collecting outstanding installments. We were surprised by the speed with which vehicle recycling or deals were concluded. In this respect, every failure can still be expected with a certain Resterlösquote. Together with the rates obtained until the failure, the loss is usually limited. The return is beneficial but the whole thing is not exactly.
Ultimately, that was also the impression we mostly won: you do not lose a lot, but you also win almost nothing with P2P loans.
Founder and self-employed take care!
However, where there are always good applications of P2P loans are in the areas of self-employment and founding . So we could observe already some successful start-up financing, which was based almost exclusively on P2P credits. Or even self-employed, who were currently in a tight financial position, were able to quickly get rid of this and repay loans well before maturity to the P2P investors. But then again with less favorable effects on the return of the investors – you have to look again for a new investment and also a decent to the lost business.
In this respect, it pays to look for start-up financiers or self-employed in the liquidity shortage in any case.
As already described, providers differ insignificantly in our experience – with regard to the return result as an investor.
The only Germany-based provider of P2P loans is Auxmoney.
All other providers are located in the Baltic States.
Interest income from P2P loans are just as taxable in Germany as all other interest gains – so on the savings account or bonds.
However, taxation from a regular bank is paid directly to the tax office, so you only have to worry about it if your personal tax rate is below the withholding tax rate of 25%. Because in this case you can reclaim too much paid withholding tax as part of a favorable review.
Unfortunately, custodians of P2P credits will not automatically deduct your taxes for you. Therefore, you must then tax your interest earned on P2P loans normally via the annual tax return.