P2P lending platforms play a vital role in easing this borrowing process by directly connecting the lender and the borrower in one platform. Traditional banking and NBFC platforms follow an extensive lending-and-borrowing process. Which could be quite time-consuming and complex to get a loan approved. Moreover, banks and financial institutions could also reject loan applications if you have a poor credit score. With P2P lending, you could avoid these hassles.

But before you apply for a loan, understand what P2P lending is, how it works, fees, how to apply for a loan on a P2P platform and things to keep in mind. Keep reading to get the details!

What is Peer-to-Peer Lending?

Peer-to-peer lending is an alternative financing system that enables borrowers to get loans from other individuals without the involvement of a financial institution. P2P lending between lenders and borrowers takes place via various online platforms. That’s why it is also known as social lending.

In peer-to-peer (P2P) lending the lenders directly send the loan to the borrowers. Lenders gain comparatively better returns than investment and savings products provided by banks. And borrowers with lower credit scores can lend at low-interest rates.

How Does Peer-to-Peer Loan Work?

The peer-to-peer lending process is hassle-free as it doesn’t comprise traditional methods like borrowing from banks, NBFCs, etc. The following steps will help you understand how P2P lending works:

Prequalification – Read the terms and conditions to check whether you are eligible for the loan or not. On successful application, the lender will provide a document comprising loan guidelines alongside an Annual Percentage Rate (APR) and other associated fees, etc.
Application – If you like the lending terms and conditions and interest rates, you may fill out the application form. The lender will check your credit score.
Approval – Wait for a few days to get loan approval from the lender.
Review – If your loan gets approved, various lenders will review your loan application.
Funds Transfer – Once your loan request gets enough investors, the amount will be electronically transferred to your account.
Loan Repayment – Based on the loan repayment terms, you will make monthly payments to the investors.

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How to Get a Loan Through Peer to Peer Lending System?

Here are the steps to get a loan through a peer to peer lending system:

Step 1: Visit the official website of a P2P lender that offers services in your region and register yourself.

Step 2: You may find various Peer to peer lending apps that will connect you directly to the lender.

Step 3: The website will connect you with the potential lender who will lend you the loan amount.

Step 4: Before signing the agreement with the lender, make sure that you pass every verification stage like personal information, background, employment position and credit history.

Step 5: The lenders will be checking your financial background and your reasons behind opting for the loan.

Step 6: After getting confirmation, the lender will provide you with several options to select from. You have to decide the one that best suits your needs.

Benefits of Peer-to-Peer Lending

Here are the benefits of peer-to-peer lending:

P2P borrowers enjoy sufficient cost benefits compared to the terms provided by financial institutions
Receiving a loan from P2P lenders is much faster and easier. Just register at their website and apply. You will stay informed with every update
The formalities and paperwork in the P2P lending system are much simpler and more convenient than in banks or financial institutions
In the case of peer-to-peer lending, the lenders have complete freedom in offering loans at their discretion
P2P lending offers higher returns to the investors alongside a low-interest rate
Smaller amounts could be borrowed unlike banks, which have a minimum loan amount
No end-usage restrictions

Eligibility Criteria for Peer-to-Peer Loan Borrowers

Anyone facing a financial crisis or in desperate need of money can borrow credit from Peer to peer lending system. Although their portals are open to everyone, they mainly draw individuals with low incomes or poor CIBIL scores for loans. But everything depends on the lender’s final decision.

Platforms Facilitating Peer-to-Peer Lending in India

P2P Platform’s Name	Rate of Interest (per annum)	Amount of Loan	Repayment Period	Registration Fees
Faircent	Starts from 9.99%	Rs.10,000 to Rs.5 lakh	6 months to 3 years	Rs.500
Lendbox	Starts from 12%	Rs.25,000 to Rs.5 lakh	6 months to 2 years	Rs.500
i-lend	Starts from 15%	Rs.25,000 to Rs.5 lakh	6 months to 3 years
LenDenClub	Starts from 6.5%	Rs.25,000 to Rs.5 lakh	3 months to 2 years	Rs.750
i2ifunding	Starts from 12%	Maximum of Rs.10 lakh	3 months to 3 years	Rs.118 (including 18% GST)
OMLP2P	Starts from 10.99%	Rs.25,000 to Rs.10 lakh	3 months to 3 years	Rs.100

Processing Fees Charged by the Peer-to-Peer Lenders

P2P Platform’s Name	Processing Fees
Faircent	2.5% to 8.5% depending upon loan amount, rate of interest and time interval
OLMP2P	1% to 10% of the amount sanctioned depending upon loan tenancy
i-lend	4% of the loan amount
LenDenClub	Rs.400 (including GST) for loan amounts up to Rs.100004% for loan amounts greater than Rs.10000 (subject to a minimum of Rs.2000)
Lendbox	2% to 6% depending on the loan amount
i2iFunding	3% to 6% for salaried individuals4% to 8% for self-employed individuals

Key Points to Check as a Borrower

Here are the key points to keep in mind as a borrower:

Being connected via online peer-to-peer lending platforms, it is essential to verify the reliability of the website before going making transactions.
If necessary, check the reviews and ratings of the website.
Ensure that the website has Symantec SSL certification because you have to share your personal details there.
At the time of borrowing a loan, spend more time researching websites. Choose the one that will be beneficial for you.
Before signing the agreement, go through all the terms and conditions of the policy thoroughly.

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Final Word

Peer-to-peer lending is becoming a popular method of availing of a loan by businesses and individuals. Individuals with low credit scores can get better deals and businesses can get crowdsourced funds. It also works for lenders who want better returns. However, do your research about the P2P lending platform before borrowing or lending. If you want hassle-free, instant loan approval in a 100% paperless manner, download the Navi App to get the amount credited directly to your account in minutes.

FAQs

Q1. Is a bank loan more inexpensive than a P2P loan?

Ans: Generally, bank loans provide an interest rate between 10-15%. But after the extra charges get added, this rate rises to 25%. However, in the case of P2P loans, you do not have to pay any extra charges.

Q2.What is the default, and what happens when it occurs?

Ans: Default occurs when a borrower fails to pay the required loan amount, either the principal or interest. Further, it turns out to be a big loss for the lender.

Q3. What are the documents required when someone applies for a personal P2P loan?

Ans: The documents required for a personal P2P loan are:
– Name
– Address
– Social Security number
– Employer Information
– Salary Slip

Q4. Are P2P Loans really safe?

Ans: P2P loans are safe for borrowers with moderate income and poor credit scores. This is because the online portals offering loans act as middlemen between lenders and loanees.

Q5. Is there any risk involved in P2P Loans?

Ans: The Peer to peer loans is not government protected. As a result, if the borrower fails to repay the loan amount to the lender, they suffer losses.

Before you go…

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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.

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