Three major shortcomings
1, with high interest rate
Private loans often have high interest rates, which are four to five times that of banks in the same period. The interest rates of some underground banks are even higher, and the annualized interest rate is above 200%, so borrowers are under great pressure to repay.
2. High risk
Many non-governmental loan organizations are established by some lawless elements, and these organizations often cheat in loan contracts, such as modifying interest rates or interest-bearing methods, which leads borrowers to have a whim that borrowers will get more and more interest, and borrowers will fall into an endless abyss.
3. The default rate is very high
Private loans often have low borrowing conditions and no effective risk control measures. Many people can't repay their loans on time, resulting in a lot of economic disputes and even domino effect. A large number of enterprises and individuals went bankrupt and social unrest occurred.
Four advantages
1, the process is simple
Private loans are not as complicated as bank loans, and many of them are loans between acquaintances. Based on the trust between individuals or enterprises, the funds will arrive soon after the two sides reach an agreement.
2. Low threshold
Private loans often do not need too much asset collateral, nor do they need to prove their repayment ability.
3. Flexible form
The loan term and interest rate are determined by both parties through consultation, and repayment is generally accepted at any time.
4. High capital efficiency
Private lending funds are controlled by borrowers themselves, unlike bank loans, which have restrictions on the use of funds.