Loan-Based Crowdfunding

Through this model, individuals may approach other professionals for a loan in return for interest. Those unable to acquire a traditional loan and/or wish to find a feasible alternative may wish to investigate debt-based crowdfunding further.

Similar to bank loans, applicants must still demonstrate creditworthiness — one’s ability to responsibly handle and repay debt. In many cases, this poses an issue for startups that have yet to fully establish credit. 

For those that do acquire loans through debt-based crowdfunding, the interest rates vary. For most crowdfunders, rates stay below 10%, making monthly payments easier to bear than most bank programs. In saying this, because of the risks involved in lending money to unestablished startups and professionals, some investors may set steeper rates. 

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