Peer-to-peer lending, or P2P lending, is a different way to get a loan where individuals borrow from other individuals using online platforms. On these websites, people looking for personal loans without collateral can connect with lenders who are willing to lend money with the aim of earning a higher return on their investment. P2P lending platforms allow lenders to review information about verified borrowers before deciding to extend loans to them.
On these platforms, lenders can also spread their investments by giving small amounts of money to multiple borrowers. P2P lending, also called crowdfunding or social lending, is becoming increasingly popular among both borrowers and lenders in India.
P2P lending features include extending loans to individuals without access to traditional banking from those looking to lend their money. This system removes the need for a bank or a financial middleman, thus making credit accessible to those who otherwise cannot obtain it through conventional financial institutions.
The key principle is to benefit both borrowers and lenders. It allows people to borrow at lower rates of interest while enabling lenders to earn good interest on their money. The entire process takes place on online platforms, where lenders and borrowers register and connect directly. Participants can engage in transactions only after a thorough assessment. All peer-to-peer lending platforms are regulated by the Reserve Bank of India (RBI).
P2P borrowers enjoy cost advantages compared to rates offered by banks or other financial institutions. Getting a loan from P2P lenders is quick and hassle-free. Registering on the website instantly connects borrowers with lenders.
These tech-savvy sites provide fast services with minimal documentation, thus eliminating the lengthy paperwork required by traditional banks, while making borrowing easy.
P2P financial platforms are dedicated to helping people get easy access to credit, and operate with a community service mindset, fostering easy exchange of information. Users generally appreciate the way these sites function. Compared to the formalities of loan applications in banks and other traditional lending organisations, P2P lending system is more focused and convenient.
Here’s step-by-step process on how to obtain loan from a P2P lending platform.
1] To start with, find a reliable P2P site that offers services in your area and sign up to become a member. The website you join will act as an intermediary, handling all formalities on your behalf and connecting you with a willing lender.
2] Before extending you with a loan, the platform will undertake checks on your background, personal details, employment status, and credit history. Stringent quality checks ensure that loans go to credible borrowers to minimise risks.
3] Provide accurate information on the website, including personal details, financial background, and reasons for taking a loan, as bidders and lenders will review this information.
4] Upon approval, choose from various options provided. Lenders will assign risk categories, and you can decide to borrow funds under the chosen category.
While P2P platforms are available to anyone in need of money, they typically attract individuals from low-income groups or those with low credit scores who may not have other options of securing credit. However, the ultimate decision to lend lies in the hands of the lender, whether it’s an individual or an institution.
