The prospect of social financing and social loans, in particular, is tremendously promising and appealing. Just the fact that it is possible to deploy private capital to service the public good, and earn a sizable interest at the same time, is sufficient for such an idea to enjoy widespread attention and popularity as a source of financing for many. In the recent years, with the dominance of social media in our lives, people have proved that the social loan model of financing is the most efficient way for individuals who for one reason or another prefer not to seek loans from traditional banks.
Before we highlight the five benefits of social loans over traditional bank loans, let us first get to know what social financing is.
What Is Social Financing?
To put it in simple terms, social financing is the use of private capital, often combined with funding from a government organization, to address a certain social requirement and to get a positive financial return. Until a few years ago, government institutions have dominated the social finance market but things are changing as there is an influx of social impact investment funds, non-profit organizations, and even mainstream investment establishments. With a program such as ‘DirectLoan’, the government targets student in need of loans and offers them a chance to consolidate several education loans into a single loan.
What makes social financing a better option for many people?
Let’s face it, ever since the financial crisis of 2008, a great percentage of the banking population is wary of banks. While the financial industry offers no new financial institutions that guarantee the safety of the depositors’ money, social financing is emerging as a more trustworthy form of banking that has a lot more to offer with less risk and higher returns. Some of the top benefits of social financing are:
1. Market segmentation
2. Better terms and low interest rates
3. Higher deposit rates
4. Better customer experience
5. Faster response to change
Have you considered getting a social loan for your next home project, course, or business? Well, now you know what you stand to gain choosing social financing over traditional sources of financing.