How do I borrow money to invest

Lending Money as an Investment: How Risky Are Personal Loans?

Lana Iliev, April 30th, 2021

Money was lent as Private citizen So far only to friends or family members, mostly to help a loved one and without ulterior motives. For banks it is Lending money on the other hand, it has long been a separate asset class, because loans are not uncommon whopping returns generate.

In the meantime, various crowdlending platforms also enable private individuals to join the Lending business and to share its above-average interest rates.

Lend thereby Investor (lender) Money in the form of personal loans to others unknown private individuals (borrowers) and thus benefit from high potential returns. This type of lending will be too P2P credit, so peer-to-peer credit or person-to-person credit, designated.

You can find out exactly how crowdlending platforms and private money lending work in our article: Crowdlending

But lending money is ultimately a worthwhile investment or outweighs it risk on a private loan? Undoubtedly, there are some things that you should know before going into P2P lendingTo invest money.

What are the risks of lending money?

The granting of personal loans is particularly for risk-conscious investors suitable. You should be aware that it is for the Total lossof the money invested can come if, contrary to expectations, the loans you have given are not repaid. However, as with many investments: the higher the risk, the higher the possible return. Because borrowers with bad credit ratings also pay higher interest rates.

On the other hand, you are basically on your own when evaluating the borrower, because the Online loan marketplace usually does not offer advice. So, first of all, the question arises: Who do you lend money to privately?

The borrowers

If you want to borrow money privately, you often have to smaller investments make. Whether the car has to go to the workshop or a new washing machine is needed - sometimes you just can't get around a loan.

Nonetheless, those interested in Personal loans Often they are characterized by a characteristic that makes one suspicious: They are usually classified by banks as not creditworthy and therefore have no choice but to accept the overpriced interest on a personal loan.

In some cases, a bit of bad luck and an unfortunate one is enough to be assessed as not creditworthy SCHUFA entry. However, there are often good reasons why a bank considers lending to a particular person to be too risky.

In addition, there is no possibility of credit advice when granting loans privately, as can usually be taken from banks. First of all, the borrowers largely independently assess whether their personal financial situation allows a (further) loan. They are then checked by the respective credit marketplace and their solvency is rated. But what criteria are used here?

The credit rating

Examining the Solvency takes place differently depending on the provider. The underlying information is obtained directly from the loan prospect or from official credit bureaus such as the SCHUFA caught up. In some cases, behavioral data is also recorded and incorporated into the credit check.
In some cases, the loan is refused. For the rest, individual ratings are set based on the Probability of failure the repayment on the part of the borrower.

However, investors are not given a detailed insight into how the rating came about. You only find out what the loan is used for and possibly how it should be repaid - provided this information is made public by the borrowers. This means that an investor who makes private loans online has far less information than, for example, a bank.

What happens if there is a payment default?

If borrowers are unable to repay the privately borrowed money, the loan marketplace runs one like a bank Dunning process a. If payments are not made continuously, a Debt collection agencies instructed. Whether the loaned money will ultimately be repaid to the lender (s) then depends on the Borrower's solvency from. In the worst case scenario, the lenders get nothing.

Protective mechanisms and security measures

Meanwhile, some of the providers are taking certain security measures to reduce the high risks involved in lending money. Tobe offered automated system variantswhich have certain protective mechanisms:

Investor Pools

The provider smava offers investors the opportunity Join investor pools. If there is a payment default, the loss is distributed across the entire pool. All lenders within the pool will then receive less money, but no one will be left empty-handed in return.

Backup pools

The provider Giromatch, on the other hand, has one Backup pool from which investors are repaid the money originally invested in the event of default.

Risk diversification

In addition, there is often the option of a automated risk diversification in which the investment amount is distributed over a variety of different loans. If one loan cannot be serviced, the loss is offset by the gains on the other loans. In general, it is advisable to always spread the risks as well as possible by investing in different asset classes.

Which additional costs reduce the return?

The Fees vary between the different providers through which money can be lent. This usually incurs costs for both lenders and borrowers. For example, Germany's leading credit marketplace requires auxmoney 1% of the invested amount from the lenders. Even if the cost of loans on online platforms is lower than with banks, you should know what amount they are before you invest.

You should also keep in mind that the interest on the loans is paid untaxed. That means that they always benefit from their return 25% withholding tax need to pull off the Net return to obtain.

What alternative is there to lending money?

A sensible alternative Crowdinvesting is in property. Theoretically, money is also lent here via an online platform. However, no loans are granted to private individuals, but mezzanine capital for Real estate projects collected. Since the borrowers are professional real estate developers, a certain amount of financing and project implementation expertise can be assumed.

Investors can take part in the investment opportunities brokered by BERGFÜRST Interest between 5.0% and 7.0% per year calculate. Since it is mezzanine capital, the real estate projects are financed only to a fraction by the high-interest crowd capital. For the most part, the financing is provided by banks, which examine the project in advance. In addition, equity of the real estate companies is also included.

On BERGFÜRST are created for investors no costs and a reasonable risk diversification is also due to the small amount Minimum investment volume of € 10 quite easy to reach. In addition, the withholding tax for projects in Germany is paid directly to the tax office. Of course, investors can also do one Exemption order to adjust. Below you will find a comparison of the two types of investment.

Lend money privately

Equity crowdfunding


Private individuals Professional investors

reason of


Covering private costs
Funding of

Real estate projects


Usually no possibility

Credit with a

Bank to include

Bulk of the project will

already have a cheap

Bank loan financed

Average 5.0% interest * 5,0 % – 7,0 %

Minimum investment
25 €* 10 €

Investor costs
Yes No

Exemption order
No Yes

* according to Auxmoney on January 5th, 2021

Find out more about BERGFÜRST

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