Social loan – what is it?

Let’s take a look at social loans and see what they really are.

Social loans are very popular in countries such as the United States or the United Kingdom. They came to Poland at the turn of the year 2008/2009 and despite the fact that they have been operating in our country for almost 10 years, it is relatively new to us.

Social loans – how do they work?

Social loans - how do they work?

Social loans, and the proper social lending loans, are by definition loans that are usually granted by private persons (although not always – legal persons, such as organizations or private companies) may use it private. The entire money lending process takes place without the participation of any bank or parabank financial institution.

In the network we can find websites that are dedicated to social loans. Such portals do not participate in the transaction, but only mediate, earning a commission on successful transactions.

The intermediary platform, i.e. the aforementioned websites connect those people who want to borrow their money (they are so-called social investors) with people who want to borrow from such investors. It should be mentioned that every person using the portal can play the role of both an investor and a borrower. The transaction is preceded by issuing a loan auction on the website, after which, with the consent of the two parties, the lender and the borrower, it is confirmed and then finalized.

Differences between a community loan and a non-bank loan

Differences between a community loan and a non-bank loan

As mentioned before, social loans are granted without financial institutions, so the rules for granting such loans are not precisely defined by applicable law.

Loan companies from the non-banking sector must comply with many legal regulations, including to the Anti-usury Act (we wrote about the Anti-usury Act in the article Anti-usury Act – what is worth knowing? Thus, we have a guarantee that the amount borrowed by us will go to our account and at a certain time – a social loan does not guarantee it. Taking a loan from a financial institution also protects us against any problems with a dishonest lender or borrower.

Advantages of a social loan

Advantages of a social loan

Despite the fact that in Poland this type of loan is not so much trusted, one can distinguish several advantages of this form of borrowing, which will certainly convince many people who need an injection of cash.

A very big plus is the availability of this form of loan. This is a very good solution for people who have some financial liabilities on their account. Unlike a loan from a financial institution, in this case the size of our existing loans is not taken into account and the creditworthiness is not so strictly checked.

Another advantage is the interest rate, which is set between the lender and the borrower. So if we decide to borrow money, we will pay back exactly as much as the borrower agrees to provide us with his funds.

Undoubtedly, the advantages of such loans include the large amount range. We borrow PLN 50 or even tens of thousands of zlotys (it all depends on the trust of the lenders).

A social loan can also be a good way to multiply your money if we have the amount we could lend to someone. In exchange for making your funds available, the broker, i.e. the loan portal, will share his commission with us. It is worth emphasizing at this point that some loan intermediaries offer up to 50% of their commissions.

Disadvantages of social lending

Disadvantages of social lending

The main disadvantage of this type of loan is undoubtedly the low level of security and the risk of fraud. The person sharing their money is at the greatest risk, as there is no full guarantee of its return. Although a loan is granted under a civil law contract, you can never be 100% sure of getting your money. If you do not receive the borrowed amount, you can ask the broker for help to start recovery, but this involves additional costs for the lender.

Taxation is another contentious issue. A person who lends their money makes a profit thanks to a successful transaction and should therefore be taxed with a 19% capital gains tax. Failure to comply with the regulations may have serious consequences.

If not a social loan then what?

If not a social loan then what?

I don’t think anyone is surprised that a social loan is not so popular in Poland. The unregulated rules of such loans and the existing risk mean that Poles both borrow money from other sources, and invest it in another, better way.

If you want to borrow money and prefer a safer source, you can check out long-term loans. The possibility of submitting a loan application online, quick consideration of documents and convenient installments are the features that place this type of loan over social loans.


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