If you are thinking of a sector that has remain untouched from Digitization, then better stop thinking. The digital set up has officially taken over the world and it is better to accept the fact that the more you deal online, the better profits you get.
How could the financial sector, which is an ever growing process, be untouched from it? A unique lending model has risen and it is called Peer to Peer Lending. It is also known as P2P lending.
Peer to peer lending is an online financial module where borrowers meet lenders. So basically, this business model works quite similarly like the lending functions of the bank. There are borrowers, lenders, EMIs, except one thing – there is no existence of any bank or financial institution. The loan tenure is predominantly short; about 1-2 years. The rate of interest can be as low as 12% and the return on investment can be as high as 36%.
Beneficial to Both the Parties
Now, the great deal about this model is that both the lenders and borrowers are in a win-win situation. The borrowers get loans at reduced rates because of competition among various donors on the portal and will to offer loan at lowest interest. Similarly, lenders earn profit because more borrowers tend to acquire money online through these portals, and there is no additional cost of registration, etc. The profit that lenders can earn through P2P lending is more than what they can earn through savings account, stock market or other investment modes.
The process is catalyzed because of the absence of banks or FIs or HCs. Hence, there are no additional charges like loan processing fees, documentation fees, like in these organizations. A bank incurs high costing because of the maintenance of offices, numerous employees and document costing. On the contrary, a financial solutions website has to maintain the website and incurs its cost and pays for marginally lesser employees. Because of reduced costs in P2P lending, all the benefits are directly passed on to the customers (lenders and borrowers)
Using the Portal
The process is convenient and user-friendly. One needs to sign up as an investor or a borrower. To validate one’s authenticity, KYC (Know Your Customer) documents are needed. This step is in line with the RBI guidelines. After that, the authentic websites carry out their verification processes. After that, the borrowers can look for potential lenders and the lenders can bid on requirements posted loan seekers. That is all a user needs to do. The loan gets disbursed.
The great part is that you are reachable to lenders all over the country, as you do not have to be physically present there.
The transparency is another good facet. In the brick mortar kind of lending, you cannot be 100% sure about the dependability of your financial partner. However, through these portals, you can surf the user profiles and see what ratings and reviews the person has.
The money of the investor stays secured as well. Most of these portals have auxiliary funds so as to rule out the possibility of the borrower being a defaulter, which can hit his investment. Also, the money is disbursed to multiple lenders, to be on the safer side. The portal also ensures that the borrowers have a good credit rating by checking their documents and loan pay back capability, in the same way like a bank operates.
The mode of payment is fast and hassle free. We all know how excruciating it can be to visit the banks and complete the list of expected papers. However, in the Peer to Peer lending mode, the set of documents needed is clearly mentioned. Also, you do not have to spend time standing in the queues and take day offs from your work. Apply online and get regular update on your mobile phone.
Time is a big asset which you save through P2P lending. These loans are advisable when you have short term funding or saving needs. The borrowers can get instant loan approvals during festive seasons, wedding seasons and for their personal shopping needs, among other reasons. Lenders can get high returns in the shortest time.
There are about 30-35 websites such as Monexo in India where you can get P2P loans. Through these websites, it becomes easy to process loans. So, for every technologically savvy person of the new generation, peer to peer lending should be an option to choose. The method has been in place since the last many years; make the most out of it!