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Peer to peer (P2P) lending functions as an online virtual marketplace that connects lenders (people with savings) to borrowers who need money (in the form of personal loans). This fintech innovation is changing the way the credit marketplace works. By bypassing the bank completely, it enables faster lending and borrowing. Investors get better risk-adjusted returns while borrowers get quick credit at low interest rates. Since it is a platform where two parties interact, you can register either as a lender or a borrower.
Borrowers seeking personal loans register online. The P2P lending platform uses data and technology to assess the creditworthiness of the borrower. After your credit check you will be assigned a risk category and suitable interest rate. Loans are disbursed to credit-worthy borrowers in the shortest possible time. If you register as an Investor/Lender, your account will be opened with the Lending Platform. You can start investing in consumer loans with as little as Rs 15,000. You have the flexibility to choose the type of debt you want to invest in. You can build your portfolio by choosing loans from different risk categories.
You will receive returns in the form of EMIs (principal and interest) as soon as the borrower starts paying the interest rates. P2P lending offers inflation-beating returns several percent higher than bank savings accounts or fixed deposits. You can either withdraw or reinvest to enjoy compounding benefits.
What Makes P2P Lending Unique?
1. Online Application Process: money lending online There is a quick way to get capital in the form of personal loans. This is completely different from the traditional loan approval process of banks and credit unions; Where you have to apply manually by filling long forms and visiting banks to review your loan status. In P2P lending, the entire loan application process is online. All you need to do is sign-up on the website to register as a borrower. Once you upload all the required documents, your loan will be approved on the basis of your credit history and eligibility.
2. Easy Loan Approval: Banks and credit unions check your loan eligibility based on your credit history (CIBIL score) only. Online moneylenders use optional information to assess your credit-worthiness including your education, monthly income, credit-to-income ratio and certain other relevant financial parameters.
3. Collateral not required: P2P Lending offers non-collateral personal loans. You do not need to pledge collateral or any other security deposit to get the loan sanctioned. Thus, if you fail to repay an unsecured loan, you will definitely face legal jurisdiction, but there is no risk of losing your property.
4. Better Rates: Lenders charge lower interest rates as compared to institutional lenders like banks. With P2P lending platforms, you can enjoy low rates with nominal service fees (if any). P2P lending companies do not need to maintain the same overhead as is the case with banks, which means they do not face the same regulatory costs. After all, you get the lowest interest rate on your personal loan.
Expecting to apply online?
Peer to peer lending is connecting lenders and borrowers directly by eliminating the need for middlemen. Make sure to do detailed research online before applying for a personal loan with a P2P lending marketplace. Choose a recognized and reputable platform. If you are thinking of registering as a money lender, invest carefully after due diligence on each risk category to earn better returns.
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