Some Interesting Facts about P2P Lending in India
Have you ever heard of peer-to-peer lending? Peer-to-peer lending, a new asset class that makes borrowing and lending easier.
Have you ever heard of peer-to-peer lending? For people who are desperately looking for a loan for debt consolidation, education, buying a car or investing in a small business, there is something new and convenient in the market for you. Peer-to-peer lending, a new asset class that makes borrowing and lending easier.
How is it convenient?
The age-old idea of borrowing and lending is given a more convenient and new twist with this concept. Unlike banks, there is no middleman involved in the process and investors can directly connect with hand-picked borrowers.
Why peer-to-peer lending is popular?
There are several benefits of peer-to-peer lending-
• As a borrower, the primary benefit you can enjoy is debt consolidation. The interest rates offered are much lower than the other forms of financial tools.
• It is very easy to seek funding with the help of this platform. When you want to grow your business, it becomes very tough for you to avail a business loan. With the help of peer-to-peer loans, the lenders will find you for lending money.
• The interest rates are not only low but are not subject to change as in a credit card.
• As a lender, the biggest reason to love peer to peer lending is the return received. On an average the rate of return is almost 16% which is extremely high in comparison to any other form of interest.
• The actions taken to reduce the default by peer-to-peer websites are highly commendable. They screen the credit scores of the borrowers and prompt the lenders to lend only when everything seems perfect. As there is no collateral involved with the loans, the lending becomes risky. In spite of that the rate of default is almost as low as 2%.
• To further curb the risk, the lenders are not allowed to fund just one loan with their capital. They can spread it among several loans so that their risks get diversified.
Things to know before lending
Peer-to-peer lending India has come under the jurisdiction of RBI now. There are around 30 online P2P companies in India, of which only 8 have received a Certificate of Registration or CoR from the RBI to carry out the P2P lending.
According to some veterans, P2P is like investing in equities. A loan approval in a P2P approval may take from one to five days but it is always advisable to understand every aspect of lending before starting to invest in these platforms.
• Diversification is always the key to success. As a lender, the money should be spread among multiple borrowers. This practice helps in mitigating the risks.
• The profile of the borrowers should always be checked as the ROI on the investment would depend on them. Most of the P2P companies divide the borrowers into categories of very low risk, low risk, moderate risk, high risk and very high risk profiles.
• The defaulter rate should also be checked. It is the ratio of defaulters on a platform and is very important in helping to choose a company.