Peer to Peer Lending

Features of Peer-to-Peer Lending

1. P2P lending system raises loans for individuals who don't have access to traditional banking systems from persons who want to invest their money.
2. By eliminating the need for a banking system or a financial intermediary in the borrowing and lending process, it extends credit to individuals who can't avail it through financial organisations.
3. The main principle of this system is to offer benefits to the borrowers as well as the investors. While it facilitates people to borrow funds in low-interest rates, it also enables savers to earn a good interest on their saved amount.
4. The entire process is conducted through online platforms where both the lenders and the borrowers register themselves and directly get connected with each other. Only after doing a proper assessment, the members can participate in the transactions.
5. All peer-to-peer lending platforms are regulated by the Reserve Bank of India.

How to get Loan through Peer-to-Peer Lending System?

1. Choose a Trusted Platform: Sign up on a reliable RBI-registered P2P site

1. Complete Profile: Submit accurate personal, financial, and employment details

1. Verification: Platform conducts credit and background checks

1. Loan Listing: Your profile is listed for lenders to review

1. Get Offers: Lenders bid based on your risk category and proposed interest rate

1. Accept & Disburse: Choose the best offer; funds are transferred digitally

1. Repay via Platform: Make EMIs through the portal as per agreed terms

Benefits of P2P Lending

1. Compared to the rates offered by a bank or other financial organizations, P2P borrowers can enjoy lucrative cost advantages.
2. The process of getting a loan from P2P lenders is very fast and hassle-free. All you need to do is to register on the website and you will instantly get connected with the lenders as well as the borrowers present on the site.
3. Being highly tech-savvy, these sites render services at a very short period of time with minimal documentation. It cuts down the hefty documentation process carried out by typical banks and makes borrowing easy.
4. These P2P financial forums are dedicated to help people and work for the betterment of people. Since they have an essence of community service, it is easy to exchange information and most of the users are very happy with the way how these sites work.
5. When compared to the loan application formalities mandated by the banks and other formal lending organisations, the peer-to-peer lending system is more focused and convenient.

Eligibility Criteria for the Peer-Peer Loan Borrowers

Even though the P2P portals are open to anybody who needs money, these mainly attract people of low-income groups or with low CIBIL score who have no other alternative to get loans. However, the final decision to lend rests with the lender which can either be an individual or an institution.

What are the Advantages of P2P Lending over Banks?

1. Traditional financial institutions and bank do not provide loans to borrowers with a poor CIBIL score and low monthly income. But in the peer-to-peer lending system, it is entirely up to the lender whom he wants to give loan and whom not.
2. Through this platform, people with a very poor CIBIL score and low income can get personal loans from multiple lenders at low interest rates and flexible terms. Since the borrowers can directly negotiate with the lenders, sometimes they get loans at a lesser rate than the banks.
3. This system doesn't require hard-core documentation process. With minimal documents, the borrower can avail loans from the lenders available on the website. The lending and borrowing process is based on the mutual understanding between the borrowers and the lenders.
4. Compared to banks, P2P lending has an upper-edge when it comes to the pace and ease of the process. The processing time is fast, and the borrowers needn't wait for a long time for the loan to get approved and disbursed like the traditional banks.

Key Points to Check as a Borrower

1. Since P2P loans are offered through online portals, it is pivotal to verify the authenticity and the reliability of the website before participating in the transactions. Check the reviews and ratings of the website as well as the lenders and then take the decision.
2. As you will be sharing very important personal as well as professional information on the website, confirm that its Symantec SSL certified to ensure the safety of your information.
3. While borrowing loan through P2P sites, don't take a hasty decision. Visit several websites, spend some time on each to understand how they work and then choose one which you think will provide the maximum benefits.
4. Never hesitate to bargain with the lender to get the lowest interest rate while borrowing the loan. Cite the lender your credibility as a borrower and ask for low interest rates on the loan.
5. Don't just focus on the monthly EMIs that are to be paid. Along with EMIs, you must check the loan tenure, processing fee if any and the total extra amount that you need to pay apart from the principal amount.
6. Before finalising a deal with the lender, be vigilant and read all the loan-related terms and conditions of the lender. Carefully go through the document to check if there is any hidden cost involved before agreeing to the terms.

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