Today, few people manage without borrowing for urgent needs. Many people are willing to take money, whether or not there is need. There are also people who face many hurdles, because nobody lends them money when they are in need. In this context, it is useful to learn about loans from Peer to Peer( P2P), where loans are freely available. They are also good platforms for leasing money and earning good returns.
P2P lending platforms are a meeting place for lenders and borrowers. Lenders who want to earn high interest on their sums offer loans through these platforms. If borrowers are ready to take the loans in accordance with the conditions laid down by the lenders, P2P platforms will provide them with the opportunity to successfully complete the transaction. P2P loans are also referred to as crowned or social lending.
There are many P2P platforms that bring together lenders and borrowers. This facility can be accessed through websites and apps. They work in a similar way, for example, as marriage brokers who bring the two parties together. The system of P2P lending is still nascent in our country. The number of P2P platforms is much lower than the conventional lending systems.
You have surplus money, for example? You are interested in gaining interest in it? You can sign up on a P2P platform and offer loans to anyone who wants to return you with the interest you want. Borrowers do not have to run around banks at the same time and can borrow from an online platform.
Eligibility criteria for loan
Normally, before borrowing banks and other financial agencies look at the borrower’s credit score. Credit score is not the only criterion in the P2P system. Details of their profiles on social media, purchases on e- commerce sites, nature of pending bills, current occupation, etc . are taken into account.
Prominent P2P Platforms
P2P services are offered by Capitol Plot, Lending Club, Island, Fair Cent, Credi Pitbull, Rupaya Exchange, Lend Box, ItoI Funding, Island, Lending Cart etc.
RBI new rules
As their functioning is similar to banks and other financial institutions, such as NBFC, the Center has brought these P2P platforms under the Indian Reserve Bank( RBI) regulations. For these purposes, RBI regulations are as follows:
• Loans provided via P2P platforms should not exceed 36 months.
• The amount loaned through the P2P platform should be no more than Rs. Ten lakh. Loans can be offered to every borrowing company. But the entire loan should not exceed Rs. Ten lakh.
• Borrowers can not accept a loan in excess of that amount
• A lender may offer up to Rs. 50,000 for each borrower.
• As unsecured loans, they should be offered. No security of any kind should be requested. Loans must be offered without condition, without security, bond or mortgage.
• P2P platforms can not lend on their own. Deposits should not be accepted.
How to take the loan?
Borrowers and lenders should sign up on the P2P platform first. Therefore, a fee must be paid in the beginning. Kyc documents( address proof, Aadhar, PAN, bank account, etc.) should be submitted when registering their names. The P2P platform will then revise its identification and other eligibility requirements.
The P2P will then examine the risk profile of the borrowers. Wage slips, letters from HR, credit card statement, bank statement, social media ID and other details will be collected. Each P2P prepares a risk profile for each borrower and rates him or her. If a person in the low risk category is rated, the borrower may be able to obtain a loan at a low interest rate. If the risk is high, the interest rate is increased accordingly.
Banks should open and extend loans through an escrow account. It is done in partnership with the P2P company. After examining the borrowers ‘ ratings, lenders offer loans to those they think deserve their help. There are many types of lenders( the risk of loans collection). Loans to those with a low risk factor who want high interest rates regardless of the high risk factor and who choose all types of borrowers are not uncommon.
To whom, at what rate of interest
Interest rates for loans made available through P2P platforms range from 12% to 36%. Depending on the risk rating, the interest rate is fixed at the end of the deal. Personal loans are normally available for 12 percent interest. It is not easy to lend personal loans to everyone, however. It depends on the employee’s profile. Banks offer 11.5 percent personal loans to those with a good job. P2P can be a good platform for borrowers who are not employees but earn income by other means, such as businesses. Those who urgently need loans and do not have any other means to earn them can also approach P2P platforms at a high interest rate.
If you have surplus funds and want to invest them for profit, you can also sign up as lenders on P2P platforms and start lending. interest amounts can be earned. There are lenders of money around us . In India, it is an ancient practice to lend money to close partners and to gather interests. P2P platforms have taken this practice to the next level by providing both lenders and borrowers with a secure atmosphere. Lenders and borrowers on these platforms do not need to be mutually aware. You don’t have to introduce one to the other. The only criteria are their risk of credit. There could be processing and other charges. Usually the processing fee is one per cent. P2P platforms decide which borrower or lender to authorize and vice versa.
Small and medium- sized enterprises have found it difficult to borrow after demonisation. This resulted in increased loans to P2P platforms. The number of people who want to increase their profits by lending has an advantage over P2P platforms. It is therefore an alternative means of investment.
Worldwide, P2P lending has only grown from Rs. 19 crore to a whopping Rs in 2002. Crore 38,300 in 2015. It is because the platforms serve both lenders and borrowers ‘ purposes. The respective regulatory bodies regulate P2P platforms in Australia, Argentina, Canada( Ontario), New Zealand, United Kingdom, France, Germany, Italy and the USA as well. In Israel and Japan, they are banned. China is the biggest P2P market in the world. While there are hundreds of these companies, there are no regulations here.