What is P2P Lending in Common Terms?
The world of financial lending opportunities has developed with leaps and bounds beyond all the conventional methods of lending from the traditional lenders like banks and NBFCs in the form of P2P or Peer To Peer lending with the support of technological advancements from the best P2P lending platform in India 2023.
What are P2P Lending Platforms, and what are their functions?
In the simplest terms, the best P2P lending platforms are a marketplace for borrowers and lenders to connect. The platforms use advanced lending companies during the on boarding process to accelerate the customer acquisition rates and reduce the turnaround times exponentially.
Once a potential opportunity is on boarded, peer to peer lending platforms use their tech-based processes powered by analytics and data-driven algorithms to segment these opportunities.
As discussed earlier, these platforms are capable of accurately categorizing all types of borrowers. It is a crucial component that helps the best P2P lending platforms improve access for people with higher risk profiles.
P2P platforms have many functions like:
Completing multi-layered background checks on all market participants Assessing and timely updating risk categories of all borrowers (new and old) Listing the loans and facilitating financial transactions Enabling collections Assisting lenders in the recovery of loans in case of payment defaults.
Peer To Peer lending allows an entity to lend or borrow without involving a bank or NBFC registered under RBI. The wonders of these entities in form of fintech companies have paved in the way to develop the pattern of lending by establishing the best P2P lending platform in India.
The process of Peer To Peer lending gives every entity to avail the opportunity of lending or borrowing through online mediums from laptop or smart phones with lesser charges and fees.
The modern day P2P lending has a unique feature of lending and borrowing opportunities for every entity which make it a significant investment in debt thus making it the most attractive feature for the best P2P lending platform in India.
Financial inclusion has been a critical issue for a country like India, where nearly 70% of the population resides in rural areas. But high smartphone penetration combined with the introduction of infrastructures such as Aadhar, UPI, Digilocker, eKYC, eSign, BHIM, and Indiastack has enabled many peer to peer lending companies.
Although peer to peer lending mainly constitute personal loans, borrowers have other reasons for applying for P2P loans such as:
- Financing their education
- Buying real estate
- Debt refinancing
- To get a secured business loan
- Loan for machinery
Why peer to peer lending considered as one of the best lending platform?
The peer to peer lending platform has now become a very popular and unique way of method of investment in the debts to earn high interest rates with comparatively minimum risks. The best P2P lending platforms in India like 12% Club, Mobikwik Xtra, Fair Cent etc. are the modern edge Fintech companies created to facilitate both the lenders as well as the borrowers by providing winning opportunities with innovation and flexibility.
By investing money into such peer to peer lending platform, an entity can earn more than a 10% interest rate, with no lock-in period with a minimum investment of Rs.1000. It sounds very lucrative and good to be true since most people fear being the pray of fraudulent acts involving some significant catch.
But the fintech companies who are the leaders in the best P2P lending platform in India are regulated and governed by the Reserve Bank of India and safe for both the purpose of investment as well as for borrowings.
Peer to peer lending platform should also be tried as an investor so that being a separate legal entity a business organization can start a new venture of lending by investing in the best P2P lending platforms in India.
Over the last year, peer-to-peer lending has seen a large number of new entrants in the market. According to Business Today, P2P lending firms such as 12% Club, Mobikwik Xtra, Len Den Club and Fair cent have estimated the number of new joiners to be in lakhs.
Fair cent, which is India’s first NBFC-P2P company, has disbursed Rs. 1145 crore loan in FY21 alone, which is a near 24% increase in its disbursals. Experts attribute this boom to the attractive returns of 14-16% p.a. compared to other asset classes.
Peer to peer lending or crowd lending is a form of debt financing wherein borrowers can request a loan from another individual without the need for any financial institutions to act as the intermediary.
The best P2P lending platform in India, as a source of financing, has the potential to extend financial inclusion globally. Groups with unconventional categories which are not entertained by the banks and NBFCs find P2P lending highly accessible compared to other investment options.
How does the best P2P lending platform in India 2023 ascertain the creditworthiness of the borrowers whose loans it curates?
The best P2P lending platform in India considers the data provided by the registered credit bureaus under RBI in India like CIBIL, Part of Transunion, Equifax, Experian and CRIF High Mark and alternate data collected directly to arrive at a combined credit rating.
In the absence of credit bureau data (a good percentage of Indian adults do not have credit scores as they may be new to credit, may not have taken any credit before, etc.), only alternate data is used and this is reflected as a lower rating.
IndiaP2P directly or via affiliates also physically verifies borrowers through field partners where possible. It is aimed to physically verify 100% of the borrowers or loans on boarded. Deviation from the same (due to COVID or other reasons) may be seen and such loans are not included in the auto-invest Growth and Income plans.
How much time does it take in the best P2P lending platform in India to evaluate the Loan Application?
In most cases, borrowers receive an instant approval or rejection of their loan application while it is done with one of the leading peer to peer lending companies available in the list of the best P2P lending platform in India. However, at times, certain additional checks are required which may delay the approval process by 2 to 5 working days.
What are the eligibility criteria for borrowing from the peer to peer lending Companies?
It is always recommended that all borrowers must have a clean credit history, income commensurate with loan requirement, stated purpose of loan, KYC and completion of physical verification in most cases. The eligibility of an applicant can be easily checked with the peer to peer lending companies by visiting their official websites or downloading the applications.
What are the benefits of borrowing from the peer to peer lending Companies?
Peer to peer lending companies are mostly under the digital platform that enables each and every borrower to apply conveniently and offers a variety of collateral-free loans with quick disbursements. Under the best P2P lending platform in India one can get the offers with the most competitive interest rates due to direct matchmaking with lenders and low fees.
What should you know before starting your journey as a lender with the best P2PLending Platform?
Since its start in 2005, digital platforms have majorly facilitated and organized the best P2P lending platform. This is due to the increased convenience, paperless process, and reduced execution time. At the start of their journey, any peer to peer lending investor must:
- Create an account on the best P2P lending platform and register as a lender.
- Submit the required documentation and get verified.
- Choose their risk appetite and review applicant proposals.
Once an investor identifies their ideal candidate, they can accept proposals and initiate the process. Like any other asset class, there are risks involved with P2P lending as well. There are two main risks to know about before investing in P2P:
The risk of payment defaults:
Collections can become a challenge. Many P2P platforms help the investor to recover the invested amount from the borrower based on the guidelines stipulated by RBI for NBFC-P2P. But in some cases, recovering the amount may need a lot more effort.
The risk of lower returns:
If your borrower repays the loans earlier than the set timeline, then you may end up with less than expected profit.
But there are many ways to remove these risks, and you must take all the required measures to do so.
Advantages of peer to peer lending:
The risk-reward ratio in P2P lending is better compared to other asset classes.
The best P2P lending platforms use discrete and AI-based algorithms for better analytics and target their audience accurately. They allot risk categories to different borrowers based on their (low to almost non-existent) credit history. In turn, investors can access a broader market tailored to their risk appetite.
Peer to peer lending platforms offer attractive interest rates to borrowers due to higher competition between investors.
Disadvantages of peer to peer lending:
The best P2P lending platform loans are unsecured, and hence recovery-related risks are present. Borrowers from high-risk categories are also eligible for loans which is not the case for organized lending. In case of payment defaults, no insurance/protection are available to the P2P investors.
The best P2P Lending Platforms in India 2023:
Lendenclub
Founded in 2014 by Bhavin Patel, LenDenClub is one of India’s fastest-growing P2P lending platforms. It caters to over a million customers at over 19,000 pin codes. With its digital lending application InstaMoney, the platform aims to improve its outreach to pan-India and increase financial inclusion.
Faircent
With over 2 lakh lenders at the end of FY-21, Faircent was India’s first P2P lending platform to receive an NBFC-P2P license from RBI. Rajat Gandhi, Vinay Mathews, and Nitin Gupta started Faircent in 2013. With an innovative portfolio of loans, such as anti-lockdown loans, Faircent aims to ease liquidity-related stress on borrowers stricken by the pandemic.
Lendbox
Another popular P2P lending platform, Lendbox, is used by over 50k investors and 5.4 lakh registered borrowers. Ekmmeet Singh, Bhuvan Rustagi, and Jatin Malwal founded Lendbox in 2015.
Investors at Lendbox have generated up to 16% annual returns by lending to various borrowers. It aims to cut down the middlemen in lending and extend financial inclusion to many borrowers through technology.
Lendingkart
In 2014, ex-banker Harshvardhan Lunia started Lendingkart to support India’s SME segment. Since its start, it has helped over 90,000 small businesses across 1300 cities. The company uses its cutting-edge credit assessment algorithms to categorize its borrowers and help you meet the ideal candidates.
Finzy
In 2016, Amit More, Vishwas Dixit, Abhinandan Sangam, and Apoorv Gawde wanted to create a platform that could enable risk-optimized investing. With this mission, they started Finzy. It offers various opportunities for investors to earn anywhere between 7.99 to 27.99% returns based on their risk appetite. Investors use advanced investment solutions like finzyPRO+, finzyBolt, and Reinvest-Pro offered on the platform to cut risk while maximizing returns.
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