Peer-to-peer (P2P) lending serves as a virtual online marketplace that matches lenders (people with savings) with borrowers who require funds (in the form of personal loans). This Fintech innovation is changing the way credit markets work. By completely bypassing the bank, it allows for faster lending and borrowing. Investors get better risk-adjusted returns, while borrowers get fast credit with low interest rates. Since it is a platform where two parties interact, you can register as a lender or a borrower.
Borrowers looking for personal loans register online. The P2P lending platform uses data and technology to assess a borrower’s creditworthiness. You will be assigned a risk category and an appropriate interest rate after your credit check. Creditworthy borrowers get the loan disbursed in the shortest possible time. If you register as an investor/lender, your account will be opened on the lending platform. You can start investing in consumer loans from as low as 15K. You have the leverage to select the loan you want to invest in. You can build your portfolio by choosing loans from various risk categories.
As soon as the borrower starts paying interest rates, they will receive the returns in the form of EMI (principal and interest). P2P loans offer returns that exceed inflation several percentages higher than bank savings accounts or fixed-term deposits. You can withdraw or reinvest to enjoy compounding benefits.
What makes P2P lending unique?
1. Online application process: Money Lending Online is an instant way to tap into capital in the form of personal loans. It is completely different from the traditional bank and credit union loan approval process; where you must apply manually by filling out long forms and visiting banks to check the status of your loan. In P2P loans, the entire loan application process is online. You just have to register on the web to register as a borrower. Once you upload all the necessary documentation, your loan will be approved based on your credit history and eligibility.
2. Easier loan approval: Banks and credit unions verify your loan eligibility based solely on your credit history (CIBIL score). Online money lenders use alternative information to assess your creditworthiness, including your education, monthly income, credit-to-income ratio, and some other relevant financial parameter.
3. No collateral required: P2P loans offer unsecured personal loans. You do not have to pledge collateral or any other security deposit to get the loan approved. Therefore, in the event that you default on an unsecured loan, you will surely face legal jurisdiction, but there is no risk of losing your property.
4. Best rates: Lenders charge a low interest rate compared to institutional lenders like banks. With P2P lending platforms, you can enjoy lower rates with nominal service fees (if applicable). P2P lending companies do not have to sustain the same overhead as banks, which means they do not face similar regulatory costs. Ultimately, you get minimal interest rates on your personal loan.
Do you want to apply online?
Peer-to-peer lending directly connects lenders and borrowers by eliminating the need for intermediaries. Before applying for a personal loan with P2P lending marketplaces, make sure you do some detailed research online. Choose a reputable and reputable platform. If you are thinking of registering as a lender, invest carefully after conducting appropriate due diligence on each risk category for better returns.
