Featured Image Caption: Peer to Peer Lending
From free music, videos, movies, shopping online for utilities and apparel, books, booking holidays to cryptocurrencies, the internet unveils many useful applications, ideas, products and services. Taking another step up the ladder of innovation and beating what was once thought impossible, today people can borrow and lend money on the internet. That day isn’t far when no head may turn towards traditional financial institutions with a brick and mortar model.
So, what exactly is this borrowing and lending called?
P2P Lending, or peer to peer lending refers to online marketplaces where individuals can issue direct loans to others. These are managed through a P2P lending company that runs its own online portal to cater to both borrowers and lenders. The website facilitates and administers the process. There are various loan investing opportunities with different risk profiles and returns available on such platforms.
How will P2P benefit borrowers in India?
People today, especially the youth, are driven by a spirit to see their dreams turn into something big and long lasting. People venture into business every day. Today a student, tomorrow an entrepreneur.
Apart from needing money to raise capital for a business, Indians also need cash to pay for the numerous universities. Some of the best in the world. Those who are aware of the high interest rates and have the money to invest, end up lending on these platforms. While, there are others who need cash but might not be able to get it through the traditional bank route. These turn to P2P lending platforms for a loan.
P2P lending benefit borrowers in India in many ways.
#1 – Access
A staggering number of loan applications get rejected right on the first stage. There’s plenty of criteria – such as low income, poor credit scores, age, or even verification stages – that end up being the factor behind loan rejections. Sure, borrowers can avoid this by ensuring they meet the requirements for a loan. But to many, it is supremely difficult to work around this problem.
This is where P2P Lending comes in. The industry has truly democratised financing by allowing a free market of sorts between lenders and borrowers. This allows borrowers with profiles featuring varied credit scores, incomes and ages to get a loan from other individuals, who may not apply the same yardstick that banks do when granting loans.
#2 – It’s Efficient
For starters, everything happens online. The borrowing process is monitored by the platform where the lender and borrower connect. Elimination of the middleman works in reducing costs as compared to financial institutions. The loan amount flows to the borrowers’ bank accounts directly, without the borrower having to step out of his home even once since they can register online from anywhere, with any verification done is performed by the platform’s staff.
Contrast this with a bank where the process involves multiple trips to the banks, followed by more verification stages.
#3 – No Collateral Requirement
A personal loan is like a rare commodity. Sure, something like a car loan or home loan – or any financing method that requires collateral, may be easier. But when it comes to personal loans, banks are always unwilling to part with their money. Naturally then, plenty of borrowers are eliminated from the bank’s pool. This is where P2P Lending once again comes to the assistance of borrowers. It requires no collateral for its personal loans and is therefore available to a far wider range of people than any traditional institution.
#4 – Competitive Interest Rates
While most banks are unwilling to dole out loans to a large number of borrowers, when they do get close to disbursing them, they often jack up the interest rates to unreasonable levels. Why pay interest as high as 18-20% on your personal loan, when P2P Lending platforms like i2i Funding could deliver you rates as low as 12%? It’s a no-brainer to be checking the platform out.
#5 – No pre-payment penalty
P2P Lending platforms don’t fuss over pre-payments and don’t penalize you for it, unlike most banks around us today. At i2i Funding for example, borrower can begin with loans as low as Rs 25,000 if they possess a good credit score. The loan period can be as small as 6 months as well, which can be prepaid without any penalty.
How do you know you are eligible as a borrower?
The eligibility requirements can vary depending on the P2P platform you’re dealing with, but most are open to most individuals who earn a regular salary or run businesses. Having your salary credited to a bank account, a basic minimum credit score, a mobile number and an email account, are likely to be some other requirements.
i2iFunding and everything you need to know
i2i funding is one of the leading P2P lending platforms in India. It connects verified borrowers who are looking for unsecured loans with investors looking for an investment opportunity. The entire process of loan application to credit evaluation, investment, fund transfer and repayment is completely online. This provides both parties with a benchmark rate of interest and also gives the investors a chance to earn higher ‘risk adjusted returns.’
i2i carries out thorough borrower profile verification and also physical verification to check the documents submitted. The benefits the team offers to both parties (borrowers and investors) and the fee structure is available on their website. It was awarded the Start-up for the year 2016 by Silicon India.
To borrow or not to borrow?
If you’re worried that these online P2P lending platforms might not be real companies, RBI has issued regulations for them! Make sure that the platform that you use has a Certificate of Registration issued by the RBI. Without a Certificate of Registration, no peer-to-peer platform can start or carry out business. These directions will be known as the Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017.
By Raghavendra Pratap Singh
– An ex-merchant mariner and IIM-Calcutta alumnus, Raghavendra Singh brings with himself a global experience of 10+ years in digital marketing, e-commerce, product development, and operations. He co-founded i2iFunding, a peer to peer lending platform, where he heads marketing and product development. He is also deeply occupied with the formulation and execution of growth strategies at i2i. Prior to this, he worked with Genpact, British Petroleum, and Aptara. He shares an enthusiasm for sports and keeps a passionate tab on politics as well.