Peer to peer lending, commonly known as P2P lending is a financial initiative that brings together borrowers looking for unsecured loans (personal or business loans) with the potential investors who want to earn high returns on their investments.
In simple words, P2P Lending companies act as a marketplace to connect the prospective borrowers who want money with the investors who are willing to provide their money in the form of loans.
So, if you are the one looking for a personal loan or a business loan, Online P2P lending is the latest trend to meet your needs.
Peer to peer lending is already a common phenomenon at the global level. However, Peer to Peer lending in India is an emerging sector that is gaining momentum at a speedy pace. Many startups are showing interest in this new technology enabled and online P2P lending business model.
P2P Lending – Important Facts you must know :
Here, we have compiled some important facts that you as a borrower or as an investor need to be aware of before applying or lending your money.
Facts For Borrowers :
- P2P Lending is an affordable and hassle free method to get unsecured loans.
- There are certain eligibility criteria to be fulfilled to become an applicant for loan that can include your age, your income, your work experience and so on.
- Easy funding may be available if you prove your credit worthiness.
- You can avail better interest rates as compared to other options like traditional banks.
- Easy repayment options may be given by various companies based on their policies.
- You get access to detailed account statements and transaction analysis through user friendly dashboards and apps.
There is a pre-agreed rate of interest between the borrower and the P2P Lender. You will have to be cautious and check for yourself all the terms and conditions of the company whose services you are opting to use.
Facts For Investors/Lenders :
Investors get an alternative to invest their money to earn better returns through P2P lending.
- An opportunity to earn higher rate of interest on the amount invested.
- Companies prefer only creditworthy borrowers to have minimal risk.
- Lenders have the choice to invest with borrowers that fit their preferences.
- Simplified registration process is done online and documents can also be uploaded online as per the convenience provided by various companies.
- You can diversify your investments with multiple borrowers to reduce the risk of default.
- Principal protection is also ensured in some cases through protection plans/fund or legal support for recovery.
P2P lending is gaining traction in India at a great pace and seems to be an exciting new business model for both borrowers and investors to meet their finance requirements.
But, P2P Lending is still an unregulated sector In India. However, RBI is closely monitoring the activities around this new business model. RBI is also working upon to regulate this mechanism of P2P lending platforms to protect the interests of the borrowers as well as the investors.
As per the developments so far, it is tentative that a separate category might be introduced for P2P lending sector in India under the Non Banking Finance Companies(NBFCs).A regulatory framework might also be set and guidelines issued to avoid any malpractices and ensure greater transparency.
A Final Note :
As an investor your primary objective is safety of principal amount as well as getting good returns. However, there is some sort of risk involved in various types of investments and P2P lending is no exception to it.
But, in the falling interest rate scenario for traditional investment options like fixed deposits, savings accounts etc. P2P lending India seems to be an attractive choice especially amongst the aggressive investors.
So, choosing the right and reliable P2P lending platform for yourself is what you need to do. These technology driven P2P lending platforms try to ensure a transparent and fair business environment. But, you need to satisfy yourself and have a thorough analysis of all their terms and conditions whether you are a lender or a borrower.
Before stepping ahead, you just need to assure that they follow thoroughly verified and a strictly monitored loan procurement process.
Looking at the astonishing rise of P2P Lending platforms, they seem to be the next big thing in India, bringing a kind of big revolution in the financial sector in India.
What are your views on the upcoming P2P lending system in India ? Do you have an experience of using the services of any of the P2P Lending platforms ? If yes, do share your valuable thoughts on the same, to help others also have a great investing or borrowing experience.
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