• Peer to Peer Lending

    Peer-to-peer lending, also referred to as P2P lending, is an alternative financing method which allows individuals to avail loans from other individuals through online lending platforms. Through these platforms, borrowers who seek unsecured personal loans can get in touch with investors who are willing to lend to them with the intention of earning a higher return on their investments. The P2P lending platforms let investors go through a list of verified borrowers and their details before they lend to them.

    Lenders can diversify their investments by lending to multiple borrowers in small amounts. Also known as crowdfunding or social lending, P2P lending is gradually gaining popularity among borrowers and investors in India.

    Platforms Facilitating Peer-to-Peer Lending in India

    Name of the P2P Platform Interest Rate (p.a.) Loan Amount Repayment Tenure Listing/Registration Fee
    Lendbox 12% onwards Rs.25,000 to Rs.5 lakh 6 months to 24 months Rs.500
    i2ifunding 12% onwards Up to Rs. 10 lakhs 3 months to 36 months Rs.100 plus 18% GST = Rs.118
    Faircent 9.99% onwards Rs.10,000 to Rs.5 lakh 6 months to 36 months Rs.500
    OMLP2P 10.99% onwards Rs.25,000 to Rs.10 lakh 3 months and 36 months Rs.100
    i-lend 15% onwards Rs.25,000 to Rs.5 lakh 6 months to 36 months -
    LenDenClub 6.5% onwards Rs.25,000 to Rs.5 lakh 3 months to 24 months Rs.750

    Processing Fees Charged by P2P Lending Platforms

    Name of the P2P Platform Processing Fees
    • Interest rate of 16% or less – 2% of loan amount or Rs.2,000, whichever is higher
    • Interest rate of 16.25% to 21% - 3% of loan amount or Rs.3,000, whichever is higher
    • Interest rate of 21.25% to 25% - 4% of loan amount or Rs.4,000, whichever is higher
    • Interest rate of 25.25% to 28% - 5% of loan amount or Rs.5,000, whichever is higher
    • Interest rate above 28% - 6% of loan amount or Rs.6,000, whichever is higher
    i2ifunding Category Salaried Applicants Self-employed Applicants or Businessmen
    A 3.0% plus applicable taxes 4.0% plus applicable taxes
    B 3.5% plus applicable taxes 4.5% plus applicable taxes
    C 4.0% plus applicable taxes 5.0% plus applicable taxes
    D 4.5% plus applicable taxes 6.0% plus applicable taxes
    E 5.0% plus applicable taxes 7.0% plus applicable taxes
    F 6.0% plus applicable taxes 8.0% plus applicable taxes
    Faircent 2.5% to 8.5% depending on loan amount, interest rate and tenure
    OmlP2P 1% to 10% of sanctioned amount depending on loan tenure
    i-lend 4% of the loan amount
    • Loan upto 5,000-10,000 Up to Rs 400 plus applicable taxes (depending on loan amount)
    • Loans above Rs 10,000 - 4% or Rs 2,000 plus applicable taxes, whichever is higher

    Features of Peer-to-Peer Lending

    • P2P lending system raises loans for individuals who don’t have access to traditional banking systems from persons who want to invest their money.
    • 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.
    • 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.
    • 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.
    • All peer-to-peer lending platforms are regulated by the Reserve Bank of India.

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

    • Go through the reliable P2P sites which provide services in your area and then sign up for it to become a member.
    • The website that you have signed up with will serve as an intermediary and conduct all the formalities on your behalf. It will connect you with the prospective lender who is willing to lend you the necessary amount of fund.
    • Before getting the fund from the lender, you have to go through numerous checks on your background, personal details, employment status and credit history. The quality check will be quite stringent as a loan is provided only to the credible borrowers to minimise the risks.
    • Since the bidders and lenders will be checking all the information that you have posted on the website, give all correct information about yourself including your personal details, financial background, reasons for taking a loan etc.
    • After you get the approval, you will be provided with several options to choose from. The lender will assign you with some risk categories under which you can decide to borrow the required fund.
    • Apart from auctioning for loans, as a lender you can spread your funds among multiple borrowers. For doing that you need to decide the risk categories for lending. But while deciding the categories remember that loans with greater risks will give you higher returns. You can also auction your loan to members who have limited funds to lend.
    • For receiving desired bids on your loan, you can fix an interest rate or premier price for the loan and receive the bids. If the loan is entirely funded for, the lenders might even bid more than the fixed interest rate that they charge for getting the right of funding your undertakings.

    Benefits of P2P Lending

    • Compared to the rates offered by a bank or other financial organizations, P2P borrowers can enjoy lucrative cost advantages.
    • 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.
    • 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.
    • 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.
    • 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?

    • 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.
    • 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.
    • 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.
    • 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

    • 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.
    • 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.
    • 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.
    • 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.
    • 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.
    • 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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