Smartika is one of the most interesting financial phenomena of recent years, which had a somewhat stormy start, problems, and obstacles related to the authorizations of the Bank of Italy that led to the change of name from Zopa to Smartika.
It is now a solid, growing, and well-functioning social lending platform.
In the world of peer-to-peer lending, i.e. lending between people, Smartika is the leading company in Italy in a recently introduced sector, but destined to change the banking world in the field of consumer loans.
The idea is simple and very widespread abroad, namely that private individuals directly lend money on a platform, which has the role of crossing the demand and supply of money and monitoring compliance with market rules. Therefore, the role of the bank is lost and transaction costs are lowered, eliminating a passage between those who offer and those who seek money.
But let’s see who is Smartika and how does it work?
In this article
- Who is Smartika?
- How does it work for lenders (Lenders)?
- How does it work for those applying for a loan (Applicants)?
- Opinion and conclusions
Who is Smartika?
Smartika is a payment institution regulated and supervised by the Bank of Italy.
In essence, it is formally a financial operator, but in reality, it is more simply a technological platform that allows people looking for a loan and people who want to lend money to meet.
How does it work for lenders (Lenders)?
For those who lend, just sign up to Smartika, deposit money, choose how much and to whom to lend and that’s it. Everything is automated and the lender will not have to worry about anything, receiving monthly repayments of interest and capital. If you choose the automatic reinvestment option, you will see your money reinvested in new loans. Otherwise, the deposited amount can be withdrawn at any time.
The most important aspect to manage is the choice of subjects to lend to. Several parameters can be crossed.
First of all, it is possible to select the loans based on the duration which can be 12, 24, 36, or 48 months. Secondly, loan applications can be selected based on the creditworthiness of the applicants. In decreasing safety, they are identified according to the following classes: A +, A, B, C, K).
I prefer to lend only in A markets with no duration limitations.
Greater risk and duration generally correspond to greater opportunities and higher returns.
There is a minimum and maximum amount that can be lent, that is a minimum of 100 euros and a maximum of 50,000 euros. The money is distributed as much as possible between a multiplicity of applicants and where possible between 50 applicants with minimum lots of Euro 10.
The costs for the lender are annually equal to 1% of the sum loaned to the Applicants and not yet repaid.
In addition, of course, there is taxation, where Smartika retains 26% of the accrued interest in advance and annually produces a tax certification of the accrued interest to be brought to the personal income tax return and subject to taxation according to the marginal rate of each.
This does not make the tool particularly convenient for those with a high personal income tax rate.
Finally, in terms of security it is important to consider that first of all there is a separation between Smartika’s money and those of the lenders; this means that they cannot be attacked by any Smartika creditors in the event of Smartika’s problems. If, on the other hand, the Applicants do not have to pay, the recovery procedures are activated and, in any case, thanks to a fund fed by the commissions requested from the Applicants, the Smartika lender protection, there is the safeguarding of their capital.
Smartika – ask or lend money
How does it work for those applying for a loan (Applicants)?
It is possible to apply for a loan from 1,000 to 15,000 euros with a duration of up to 48 months at variable costs depending on creditworthiness, determined based on socio-demographic and income parameters and based on information provided by the various public and private databases.
To apply for a loan, you will need to provide preliminary information and once you have obtained feedback on whether or not the loan can be granted, you will need the classic documents required when opening a loan.
The Applicant pays a commission upon disbursement of the loan, given by the commission paid to Smartika (varies from 1% to 3.50%) + that provided for by the Smartika Lender Protection fund (from 0.15% to 3.70% ), with a minimum amount of 40 Euros. To this are added 2 Euros per month for the collection of the installment (this charge does not take place in the case of 12-month loans).
On the other hand, the early repayment of the loan does not involve additional costs.
Opinion and conclusions
In summary, I think that Smartika is a great idea and an alternative to traditional insurance investment tools. I think it can be proven as a lender, perhaps initially with even a small amount like 100 euros and staying on less risky loans and then gradually increasing your investment. As an Applicant, on the other hand, it has a generally lower cost than other companies that offer consumer loans and this is certainly a plus of the platform.
I currently earn about 6% gross on my loans without risking too much without considering the return obtained by reinvesting the interest. By subtracting delinquencies, commissions, and above all taxes, the net return is about half, but I will be more precise when I have sufficient and long experience. Everyone has to see what tax regime they are in to judge.
I find the platform graphically improved, in its navigability and its structure, it can be speeded up and integrated with new features, statistics, and more data on loans and returns.
If Smartika can grow and improve then perhaps it will assert itself and carve out an alternative role to that of the banks.