P2P or Peer to Peer lending loans in Spain. Evolution

Image result for spain banks In Spain, banks have always had the possibility of offering very diverse financing services such as the commercialization of assets, unlike in the USA where certain practices could not be carried out by banking institutions. That is why in our country the banking system has always enjoyed a noteworthy role in the financing market, also due to the absence of a competitive market where there are other sources of financing for private companies or for individuals.

Currently, loans in Spain controlled by banks are around 80% of the credit, which means a great dependence on this type of financing- Turelovewatches online installment loans.

As we can see in the chart below, in Spain non-bank financing constitutes 22% of the total where we would find P2P (peer to peer lending) loans or loans between people, while in countries such as the United States or the United Kingdom this type of financing accounts for more than half of the total, around 65% – 70%.

 

The growth of P2P Lending (peer to peer lending)

The growth of P2P Lending (peer to peer lending)

However, in our country, alternative financing is growing exponentially. The economic crisis in which our country has been immersed has meant a closure of the banking tap, a fact that has forced companies and individuals to seek new ways of financing, thus giving importance to P2P or P2P Lending loans (peer to peer lending ) and that has generated therefore the appearance of new platforms and non-banking institutions in charge of managing the P2P Lending in Spain, that is, loans in Spain, as is the case of MytripleA.

 

Peer to Peer Lending: Spain vs. Europe

According to a report prepared by the University of Cambridge, Spain, regarding alternative financing online, where P2P loans are located, it is in a 6th place with 63 million euros managed by this route, it is behind the leader of this market, such as the United Kingdom, which has moved 2,337 million euros, in addition to other countries such as Sweden, Germany or France.

In the following graph, you can see the number of platforms that exist in each of the European countries.

 As you can see the United Kingdom, referring to the number of peers to peer lending platforms, stands out above the others with 65. Below are several countries where Spain is with 34. France with 33 and Germany and the Netherlands with 31.

 

P2P loans in Spain compared to other alternative sources of financing

Of all the existing alternative financing systems in our country, such as the Crowdfunding of donations, Crowdfunding of retribution or Invoice trading, the P2P Lending method or also known as P2P loans or peer to peer lending represents the second alternative financing system with more volume of money manages with 13.7 million euros against the Crowdfunding of remuneration that is the most used moving 35.1 million euros in 2014.

In the following chart, you can see the situation of the alternative financial market in Spain, as well as the evolution of the five main alternative financing systems between 2012 and 2014.

Source: Prepared by the authors based on the Report of the University of Cambridge (volume in millions of €)

As we can see the P2P loans (peer to peer lending) in Spain have gone from having a volume of less than one million euros in 2012, reaching 2.7 million in 2013, reaching a volume of 13.7 million euros in 2015 Peer to peer lending in Spain has had a remarkable growth of 363% in 3 years, being the financing system that has grown the most compared to the other methods whose growth is close to 150%.

This shows us that the business fabric is discovering this new system of alternative financing as a method of business growth and development, opting for P2P Lending instead of bank financing that is increasingly limited.

 

Trends in the P2P loan market in Spain

  • Market growth P2P lending or peer to peer lending : The exponential growth of the P2P loan market will continue to occur throughout Europe and Spain, in this case, will not be left behind, if it is true that this new financing system has arrived later in our country and it is now that it is beginning to be noticed, but given the data, this growth will not cease in the future.
  • Institutional investments investing through platforms P2P lending: In the case of MytripleA, it collaborates with the platform GLI Finance Ltd, a leading investment fund in London that also participates in the loans published by the platform with the same conditions as any small investor.
  • Investment agreements between Peer to Peer lending platforms and Banks: Far from acting as competitors, there are many agreements that are being signed where P2P lending platforms and banking institutions collaborate in order to find a benefit for both and for the financial market in general. Some examples of these agreements are the case of ING Direct with Kabbage or Citibank with Lending Club.

 

P2P loans or peer to peer lending in MytripleA

P2P loans or peer to peer lending in MytripleA

In little more than a year of existence in MytripleA we are proud to summarize in the following points some milestones that we have achieved:

  • More than 130 loans
  • More than 4 million euros financed by SMEs and the self-employed
  • More than 1000 registered investors
  • Revelation Company Award for Economic News
  • Most Innovative Company Award by FOES
  • Most Innovative Product Award for Economic Castilla y León

 

Interest rates: Guide to know everything about this percentage

The interest rate can be approached from two points of view, from the perspective of the investor and from the perspective of the applicant of a loan.

  • For the investor, the interest rate is the benefit that he obtains for an investment or for lending his money during a certain time in the case of crowdlending investors, and during which he can not enjoy it.
  • For the applicant of a loan, the interest rate is the cost that implies the granting of a loan.

The economic terms related to finance, often, involve confusion and lack of understanding, since they usually carry an associated complexity. The interest rate covers a wide range of concepts, so we have made this guide useful for you to know everything related to the interest rate. We start!

Tipos de interés

 

What is the interest rate?

What is the interest rate?

The interest rate can be defined in general terms, such as the compensation received for the use of a unit of capital during a specific period of time. To fully understand the definition of the interest rate we must take into account the main variables that constitute it, time and money. It is common knowledge that money loses value over time and the interest rate is the index that compensates for this variation in value.

Therefore, the interest rate refers to the price of money that compensates the depreciation of value that it suffers from the passage of time and can be understood, as we said in the introduction, on the side of the investor or on the side of the person or company requesting financing.

 

Types of interest rates

Types of interest rates

As we have already mentioned, one of the main reasons that lead to the confusion of the interest rate term is all existing varieties that refer to different concepts. We explain them to you!

 

The interest rate can be calculated in different ways, these are the varieties that are related to the calculation of interest:

Simple interest rates

The simple interest rate is the interest that is generated from the initial capital during the whole period, that is, that the interest generated does not continue to generate new interest.

Compound interest rates

The compound interest rates are the generated interest that increases the initial capital and returns to produce new revenues.

 

Depending on the stability during the current period of time of the operation, the interest rate can be subdivided into two types:

Fixed interest rates

The fixed interest rates are those that remain impermeable over time. It is fixed at the beginning of the operation and remains constant until the end of it.

Variable interest rates

Variable interest rates

The variable interest rate undergoes modifications during the established period of time. It is constituted by a reference index and a differential margin. The EURIBOR is included in the variable interest.

Mixed interest rates

During a period of time, generally at the beginning of the operation, the interest rate is fixed, then it starts to behave as a variable interest and can be modified.

 

Finally, depending on the relationship with the inflation rate. There are different types of interest:

Nominal interest rate (TIN)

The nominal interest rate is the interest rate agreed upon in the loan operation. It is the result of the real interest rate and the inflation rate, in short, the real cost of the loan, that is, the final amount that the borrower must repay.

Real interest rate

The real interest rate is the nominal interest rate less inflation. The final result refers to the final gains.

Effective interest rate

It takes into account all the expenses derived from the operation. Interest is updated through compound capitalization. Generally, the effective interest rate is updated annually (APR). You can also mention periods of less than one year, monthly, half-yearly, quarterly … etc.

Legal interest rate

Legal interest rate

The legal interest rate is the one stipulated by the law, it is usually used when there is no prior agreement on the terms of the operation.

 

Each operation or entity determines the interest rate to which you want to link the conditions of your loan or investment. Next, we focus on the interest rates applied in crowdlending operations, both from the point of view of the investor and the borrower.

 

The interest rate on a loan or investment in crowdlending

The interest rate used by MytripleA in crowdlending operations is a simple and variable interest rate updated with the EURIBOR index in the case of operations over one year.

Unlike other products, in many of the crowdlending operations offered by MytripleA, the interest produced is received on a monthly basis, so you can either start having the benefits the month after your investment or you can also reinvest those benefits to multiply your profitability.

Clarification: A concept that is linked to the interest rate is the system of amortization of the investment or the loan, since depending on how it is, the way of calculating the interest rate will vary. The French amortization system is used in loans and crowdlending.

French amortization system

This type of amortization consists in applying the percentage of the interest rate on the capital pending amortization. In the case of loans and investments, this type of amortization is generally used, therefore interest or profitability will be applied to the capital that is still to be paid or received. In the crowdlending this type of amortization system is applied so you have to take into account that you pay (in the case of being a company that requests a loan) or you will receive profitability (in the case of the investor), the percentage of the type of interest applied on the living capital taking into account that month to month you receive or pay monthly installments of capital and interest. That is where the crux of the matter lies and where many of the doubts about how the profitability or the interest rate in crowdlending is calculated. Therefore, in this case, the amortization of capital acts increasingly, while interest is amortized in a decreasing manner.

Once you know what type of interest is used, we explain what characteristics are taken into account to determine one type of interest or another.

Aspects to take into account to determine the interest rate

From the perspective of the applicant of a loan, the interest rate on the loans for crowdlending is determined by the risk of non-payment. Therefore, from MytripleA, all the documents related to the company and its activity are analyzed, and once the analysis is determined, the interest rate is fixed.

The interest rate offered by MytripleA is from 2% per year + EURIBOR for those companies that have a guarantee from a Reciprocal Guarantee Company. For those companies that are financed without the SGR endorsement, interest rates rise to approximately 6-8%.

From the investor’s point of view, the interest rate also refers to the risk-return ratio. The greater the risk involved in the operation, the greater the profitability will be offered. The interest rates you can access as an investor through MytripleA are from 2% + EURIBOR up to 10%.

 

How to calculate the interest rate of a loan or investment

Once you know everything about the interest rate, you only need to calculate the interest rate for your loan or for your investment- special info. For this reason, from MytripleA we have developed a tool to calculate the interest rate of your loan, and another to simulate your investment.

Infographics of interest rates

 

In the following infographic, we leave you a summary of the types of interest rates.

Infografía tipos de interés