Peer to peer lending or social lending is the process of lending money to enterprises or individuals through online platforms without involving financial institutions. 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.
However, there are a few crucial points to keep in mind before you opt for P2P lending. Read to get all the details here!
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.
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:
Here are the benefits of peer to peer lending:
Also Read: How To Get Instant Loan Without CIBIL Score?
|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 lakhs||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|
|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. 10000.|
4% 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 individuals.4% to 8% for self-employed individuals.|
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.
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 need.
Firstly, banks provide loans alongside an interest rate of up to 15%. However, adding the other charges like loan processing, prepayment, file handling, etc., this interest rate rises up to 20%-25%. So, while speaking about P2P lending, it doesn’t have any hidden charges.
Secondly, when it comes to credit score, every bank or financial institution approves loan requests of an individual depending on his/her credit score. If it is beneath 700, the chance of loan sanction drops. But, in the case of P2P money lending, it offers loans to people even if they have a poor credit score.
As a borrower, here are some vital points you should check:
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, P2P lending has its own set of disadvantages too. As a borrower or a lender, you must weigh the benefits and disadvantages before you make your final decision.
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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.
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.
Ans: The documents required for a personal P2P loan are:
– Social Security number
– Employer Information
– Salary Slip
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.
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.
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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.