# Everything You Wanted to Know About Social / Private Loans

> A guide to social and private loans – the advantages, the risks, and what to check before you borrow or lend.

- Canonical URL: https://www.shavve.io/en/articles/social-private-loans-guide
- Category: Budget & money habits
- Published: 2023-06-01 · Updated: 2026-10-25
- Reading time: 6 min
- Language: English
- Shavve - שווה — https://www.shavve.io/en

## The short version

- Social loans let people lend money directly to each other – no bank in between.
- Private loans come from friends, family or non-bank companies.
- The terms are usually more flexible – but it's important to understand the implications.
- A quick, available solution – that needs a careful look at who lends and to whom you repay.

When you need money fast, a social or private loan can look like a shortcut. Sometimes it is – but understand how it works and what the risk is before you sign.

## What is a social loan?

In a social (P2P) loan, private individuals lend money to other people through digital platforms. It's not a bank – it's **an arena where lenders and borrowers meet**, and everyone chooses whether and how to take part.

## What is a private loan?

A private loan can come from people close to you – family or friends – or from non-bank credit companies. The terms are usually more personal: sometimes interest-free, sometimes with high interest – depending on the agreement.

## How does it work?

1. **The borrower applies** — They present their need and details – purpose, amount and period.
2. **Lenders decide** — Each lender reviews the request and decides whether to invest, and how much.
3. **Interest and terms are set** — The interest usually varies with the borrower's credit rating and the type of loan.
4. **Repayment follows the agreement** — Repayments go through the system, and it's wise to make sure every step is clearly documented.

## Advantages?

**What works for you**
- You can get money quickly, without all the bank bureaucracy
- The terms are more flexible, sometimes with no guarantors needed
- There's a sense of trust when the loan comes from someone who knows you

**What to watch**
- Not necessarily supervised like a bank – the terms are on you
- High interest can make a small loan expensive
- A loan from people close to you can strain the relationship if something goes wrong

The best way to depend less on emergency loans is an **emergency fund**. With a cushion of a few months of expenses, you are less likely to take a loan on bad terms. See what that looks like for you:

*Emergency fund: how many months of peace of mind? (on the website: an interactive calculator)*

### A side-by-side look: bank, social loan and private loan

*A general comparison – not a description of any specific product.*

|  | Bank | Social loan (P2P) | Private loan |
| --- | --- | --- | --- |
| Oversight | Full supervision | Depends on the platform – check it is licensed | Usually none – it all rests on the agreement |
| Speed | Relatively slow | Usually fast | Usually very fast |
| Flexibility | Limited | Higher | Very high |
| Interest | By risk profile | Varies with the borrower's rating | From zero to high – per the agreement |
| Documentation | Organised | Through the platform | You need to arrange it yourself |

## And what are the risks?

> **Watch out — Clear terms, preferably in writing**
> Because there is not always regulation like in a bank, make sure the terms are clear and both sides understand what they sign. If it is a private person, have a **written agreement** to avoid unpleasantness later.

### What happens if you miss a payment?

- **Payment day** — The payment doesn't go through: Get in touch right away, before the delay starts to add up.
- **A few days later** — Late interest or fees: As the agreement states – you can, and should, read it beforehand.
- **Later** — Collection: With a regulated provider the process is orderly; with a private loan it follows the agreement and the law.

**Before you sign a loan**

- [ ] The effective annual interest and the total amount to repay
- [ ] The monthly payment, and whether it fits your budget comfortably
- [ ] What happens if you pay late – default interest, fees
- [ ] Whether you can repay early, and at what cost
- [ ] Whether there's a clear written agreement with names, amounts and dates
- [ ] Whether the lender is known and operates lawfully – check with the regulator

## How to compare loans: total cost, not only the rate

A low rate on paper can hide fees, indexation and other terms. To compare properly, ask each lender for the same data and work out the total that will be paid. The simple comparison is how much will be paid in all beyond the principal, and in which months.

**What to ask each lender**

- [ ] The loan amount, and what you actually receive after fees.
- [ ] The annual interest rate and how it is calculated, and whether it is fixed or variable.
- [ ] Indexation, if any.
- [ ] Opening, management and early-repayment fees.
- [ ] A full repayment schedule with the total that will be paid.
- [ ] What happens if a payment is late.

| Type of loan | Who lends | What to check |
| --- | --- | --- |
| A bank loan | A bank | Rate, fees and repayment terms, and the chance to negotiate with the bank |
| A social loan | A platform that connects lenders and borrowers | The rate and fees, whether the platform is licensed, and what happens if no lender is found |
| A private loan | A person or private body | A written agreement, the rate and guarantees, and a check on the lender |

## Red flags

- A demand to pay a fee up front before you receive any money.
- No written agreement, or terms that change verbally.
- Pressure to decide fast, or a promise of approval without a check.
- A lender you cannot identify or find registered anywhere.
- Interest or indexation that is not clearly explained.

## Before you borrow: three questions

1. **Does the repayment fit the budget?** — Work out the monthly repayment against income and fixed costs. The [family budget guide](https://www.shavve.io/en/articles/family-budget-guide) shows how.
2. **Is there a cheaper alternative?** — Consider a bank loan, drawing on an emergency fund or spreading the expense.
3. **What if income is hit?** — Check whether there is flexibility in payment, and the cost of falling behind. A small emergency fund lowers the risk, see [Emergency fund](https://www.shavve.io/en/articles/emergency-fund-guide).

> **Watch out — Loans to friends and family**
> When you lend to a relative, document the amount, the repayment dates and whether there is interest. A written agreement prevents misunderstandings and protects the relationship. If the sum is significant, consider speaking to a lawyer.

## An arithmetic example comparing cost

The example is made up and is only to show the method; the numbers are not any real lender's interest. Suppose two offers for a ₪20,000 loan over 24 months. In offer A the monthly repayment is ₪900, and in offer B it is ₪880 with an opening fee of ₪600. In offer A you pay 900 × 24 = ₪21,600 in all. In offer B you pay 880 × 24 + 600 = ₪21,720. The offer with the lower monthly repayment is in fact the more expensive. So compare the total, not the monthly repayment.

## What a loan agreement should contain

**A checklist for the agreement**

- [ ] The full details of both parties and a signature from both.
- [ ] The loan amount, the interest, the indexation and the repayment dates.
- [ ] What happens when a payment is late, and the cost of early repayment.
- [ ] Guarantees and security, if any, and what stands behind them.
- [ ] How disputes are resolved, and whom to contact when there is a problem.

## What to do when repayment is hard

1. **Act early** — Contact the lender before you fall behind, not after. Many lenders prefer an arrangement to arrears.
2. **Ask for an arrangement in writing** — A rescheduling or a deferral, with clear terms documented in writing.
3. **Check the budget** — See whether you can cut spending or raise income, following the [family budget guide](https://www.shavve.io/en/articles/family-budget-guide).
4. **Ask for advice** — Debt-support organisations can help, and with large debts consider speaking to a lawyer.

## Guarantors and collateral: what it means for you

Many loans ask for guarantors or collateral. A guarantor undertakes to repay the debt if the borrower does not, so it is a heavy commitment that should not be given lightly. Collateral, such as a charge over an asset, lets the lender collect from it if there is no repayment. Before signing as a guarantor, or when you put up collateral, check the full amount that could fall on you, and what happens if the borrower disappears. This is a decision to discuss with a lawyer.

**When you borrow**
- Understand every cost before you sign.
- Know what may happen if you pay late.
- Make sure there is no one-sided right to change the interest.

**When you lend**
- Decide how much you are willing to lose if it is not repaid.
- Document everything in writing, even between relatives.
- Check the borrower's ability to repay, not only the willingness.

## How to prepare for a conversation with a lender

**Before the call**

- [ ] Know how much money you need, why, and by when.
- [ ] Work out what monthly repayment you can sustain without hurting essential spending.
- [ ] Prepare questions on interest, fees, indexation and early repayment.
- [ ] Ask for the offer in writing, and do not sign under pressure.

## How to read a repayment schedule, and indexed versus non-indexed

Before signing, ask for a repayment schedule and check four things in it:

- The split of each payment into principal and interest. In the first payments a large share is interest.
- Whether the loan is linked to the consumer price index. In an indexed loan the principal rises with the index, so total repayment may be higher than the amount in the schedule.
- Whether the rate is fixed or variable, and what drives the change.
- Fees: opening, management and early repayment. Ask what it costs to close the loan early.

When comparing two offers, compare the total of all payments over the life of the loan, not the monthly payment. A low monthly payment can hide a longer term and a higher total cost.

If the lender is someone you know, write an agreement anyway: the amount, the repayment dates and the interest, if any. A written agreement protects both sides and protects the relationship.

**Is a social loan a bank loan?**
No. It's a loan between people through a platform. The terms and supervision differ from a bank loan, so read the agreement carefully.

**Should I lend to friends or family?**
You can, but treat it seriously: agree an amount, repayment dates and a written summary. Above all, lend only an amount you can manage without.

**How do I compare loans?**
By total repayment and effective interest, not only the monthly payment. A low monthly payment can hide a long period and a high cost.

**How do I compare loans?**
Compare the total cost: the amount actually received, interest, indexation, fees and a repayment schedule with the total that will be paid, not just the quoted rate.

**What are the red flags in a private loan?**
A demand to pay up front, no written agreement, pressure to decide fast, a lender you cannot identify and interest or indexation that is not explained.

**What does signing as a guarantor mean?**
A guarantor undertakes to repay the debt if the borrower does not, so it is a heavy commitment. Before signing, check the full amount and consult a lawyer.

**Want all your commitments in one place?** Shavve helps you see loans, credit and savings together – so you can decide with a calm head.

## Sources

- [gov.il – Capital Market Authority](https://www.gov.il)
- [Bank of Israel](https://www.boi.org.il)
- [Bank of Israel: the “Kama Kama” guide to comparing banking costs](https://www.boi.org.il/information/bank-paymnts/financial-education/campaigns/kama-kama_guide/)
- [Capital Market, Insurance and Savings Authority (gov.il)](https://www.gov.il/he/departments/capital_market_insurance_and_savings_authority)