Ever since its inception, Peer-To-Peer lending or P2P lending has created a stir amongst the borrowers due to the easy loan procurement facility that it offers. Also known as crowd lending or social lending, this method allows people to borrow money without the involvement of any bank or financial organisation. As the name suggests, this flexible mode of person to person debt financing removes the need for any brick-and-mortar banking establishment and makes the borrowing process much easier. This crowd funding method made credit approval possible for those borrowers who are otherwise unable to avail it through conventional financial institutions. Whenever you think about taking any loan or credit, the first word that usually pops up in your mind is a bank. But, peer-to-peer is a new concept that has brought significant changes in this perception of the borrowers. Even though banks are till now the most trustworthy medium of borrowing, P2P lending has received a high amount of popularity and acceptance among people who either don’t have easy access to banks or don’t want to go through the complex process of loan application and approval. The peer-to-peer online platforms serve as alternatives for all those individuals who want to avail instant personal loans without undergoing a complex documentation process.
Peer-to-peer lending is a form of crowdfunding which is used to raise money for people who don’t want to borrow funds through traditional lending organisations. This informal lending process discards lengthy formalities which are typical of banks and offers loans with minimal documentation. It generates returns for those who want to borrow as well as for those who want to invest.
P2P lending system is solely based on the Peer-to-Peer lending sites which are designed for the wellbeing of people and to work for their benefits. Managed and operated by groups of freeformers, these websites allow people to lend and borrow money from each other directly. The main motto of these sites is to eliminate the need for intermediaries and connect the borrowers directly with a number of lenders on one single platform. These websites also offer loans at a much lower rate for those who require it even at a higher risk. The P2P lending sites earn revenue in the form of fees charged from both the lender and the borrower registered on the websites.
The special features which make the peer-to-peer lending system stand out from the hoard of other informal lending options are listed out summarised here:
The process of getting a loan through the peer-to-peer lending websites is very simple and easy. Whether you are a new entrant in the P2P lending method or have previous experience in borrowing through these sites, follow the given steps to get loans through a peer-to-peer lending system:
Personal loans most of the times come up with a lot of tension and lead to an unsure financial future. The lengthy loan application and approval process make it even more tedious for the borrowers. P2P lending sites, on the other hand, make it as simple as a cakewalk. If done in a correct way, P2P lending can be highly beneficial for you and take your financial portfolio to a new level. Some of the vital advantages that you might expect from this system of lending are as follows:
The interest rate in peer-to peer-loan is mainly calculated on the basis of Monthly reducing balance. In this system, the borrower has to pay interest only on the remaining loan balance and not on the entire principal amount.
Suppose, you have taken a loan of Rs.5 lakh with an interest rate of 15% p.a. for a period of 5 years. When you pay the first month’s EMI, consisting both the principal amount and the interest, a part of your principal amount will also get paid along with it. As a result, with every EMI payment, some amount of the principal amount will get paid off and your EMI will automatically keep on reducing every month. This means, after the first month’s payment, you have to pay the EMI only on the remaining principal amount of the loan and not on the actual principal amount of Rs.5,00000.
Even though the P2P portals are open to anybody who is in need of money, these mainly attract people of low-income groups or with low CIBIL score who have no other alternative to get loans. If though anybody can ask for a personal loan through the peer-to-peer lending websites, the final decision is taken by the lender, which can either be an individual or an institution.
Individuals who want to borrow or lend through the P2P lending system, need to register themselves with the website first. Whether an individual is registering as a lender or as a borrower, he or she has to enter all their personal as well as professional details in the particular lending website. While signing up as a borrower, you need to enter your name, address, pan card, six month’s bank statement, and salary slip(if job holder).
The provided details will be safe while it is transmitted and the confidential information will be kept protected. Based on the borrower’s provided details, the admin of the website will put you in a certain category. Next, it’s up to the lender to take the final call based on the credibility and loan repayment ability of the borrower.
Even though banks are considered to be the most trustworthy medium of lending, the peer-to-peer lending system has changed the scenario to a great extent. It has a number of perks that make it an advantageous option compared to the traditional banking system. Under this section you will get to know the advantages of peer-to-peer lending over banks:
As a borrower, you might find it very easy and convenient to apply and get instant loan approval through this lending system. But, since the entire process is done online you must use due diligence while participating in the borrowing activities. Following are some of the vital points to keep in mind before going for a peer-to-peer loan:
The P2P lending system is working as a flexible financial window for people who are not eligible for getting a loan from the banks and other financial institutions. However, just like any other lending method, this system has its own drawbacks. In recent times, people have shown their concerns about the authenticity of the websites and risk factor associated with the lending and borrowing activities that are conducted through the P2P platforms.
The fact is, while there are many P2P lending platforms who work relentlessly for the financial well-being of the people across India, there are some websites which practise illegal means as well. It is completely at the user’s discretion to check the authenticity of the websites and lenders before entering into any transaction with them. If you perform the activities with due diligence and prudence, P2P lending is undoubtedly a very safe and convenient medium of borrowing loan at the time of urgency when all other options are not accessible for you.
P2P lending is garnering high popularity among the users with every passing day. It is a saviour for the underprivileged and under-banked sections of the society who are either not considered eligible for loans or don’t have easy access to the banks. Most of the users are very happy with their dealings with the P2P lending platforms. If used prudently, this flexible and easily accessible lending system can change the graph of your future financial portfolio.
As per the recent reports, AnyTimeLoan.in - an on-demand peer-to-peer (P2P) lending platform that was founded by Neha Jain and Keerthi Kumar Jain in 2014 - has finally received its NBFC P2P licence from the Reserve Bank of India (RBI). This Hyderabad-based company provides users the option to borrow or lend money from another individual using its user-friendly platform. As per the RBI guidelines, a peer-to-peer lending platform acts as an intermediary while offering customers the services of loan facilitation through an online medium or any other method. According to the statement of the Founder and Chief Executive Office at AnyTimeLoan.in, K. K. Jain, after receiving the NBFC P2P licence from the central bank of the country, the company is planning to achieve a monthly loan disbursal rate of Rs.100 crore in the upcoming 18 months. Till date, AnyTimeLoan.in has recorded a total loan disbursal of more than 57,000. This aggregates to the disbursal of over Rs.62 crore, while the gross transaction value stands at Rs.110 crore.
Using the website of AnyTimeLoan, eligible borrowers can avail instant unsecured loans for personal, educational, and business purposes by connecting with investors or lenders in a 100% digital ecosystem. Furthermore, this company uses several advanced tools and cutting-edge technologies that revolve around artificial intelligence, data science, predictive science, and machine learning. This, in turn, helps ensure real-time decisions on borrowings and lendings of the customers. Additionally, AnyTimeLoan claims to be a mutual fund lender that does not charge any registration fee. This company earns its revenue only when an investor gets his or her money back along with the promised returns. During the financial year 2017-18, the non-performing assets (NPA) of this company stood at less than 0.27%. This allowed the lenders at AnyTimeLoan.in to earn more than 39.6% per annum as returns. As per the Co-Founder and Chief Financial Officer at at AnyTimeLoan.in, Neha Jain, the company has created an asset class for investors that offers high liquidity, good returns, complete transparency, and convenience while making an investment in a tap and diversified portfolio. In addition, this company offers investors average lending exposure of Rs.10,000 across credible and legitimate borrowers who are screened using scientific methods.
13 November 2018
P2P lending is going to witness a huge growth in India in the next few years. At present India has about 30 online P2P lending platforms and an overall loan portfolio of $25 million. However, as per the estimation, in coming 5 years the value of P2P lending in the country will hit around $4 billion (160 times more than the current lending value). Even though this sum is quite small in comparison to China which currently has a P2P lending portfolio of about $100 billion, it indicates the growth opportunity for P2P lending in India.
According to the experts, the current allocation of Rs.3.073 crore budget (double of the previous budget allocation) to the Digital India scheme is the main reason contributing to the growth of the P2P lending industry in the nation. Moreover, the highly affordable rate of mobile data and increasing diffusion of smartphones are among the other vital factors instrumental in its growth.
22 May 2018