Peer-to-Peer Lending – A Fad or the Future? Find out Now.
P2P lending (or Peer-to-peer lending) has been making news for quite some time now. From being an obscure term referenced by nuanced investors and financial experts, today P2P funding has gone mainstream.
Also, known as “social lending,†P2P platforms connect borrowers directly with lenders eliminating the need for any middlemen. Just like buyers can purchase products directly from sellers at eBay, with a P2P platform like Antworks P2P, borrowers can avail their required funding (loans) from individual lenders, without the need for traditional financial intermediaries like banks and other NBFCs.
Before, we take a look at, how peer to peer lending in India is disrupting banks and other traditional financial services; let’s take a few minutes to take a quick look at the background and evolution of this new form of social lending.
What is P2P lending and how does it Work?
Simply put, P2P funding is the new-age avatar of the age-old practice of borrowing money from friends and family. Instead, of borrowing from your acquaintances, here you reach out to individual lenders who provide you with the required funds for a nominal interest rate.
To borrow, you have to register at any one of the popular P2P platforms online. Once, you register the platform connects you with lenders who match your requirements and needs. You can then choose your preferred lender and send in a loan request.
Once the lender goes through your eligibility criteria and other details, he/she may sanction your loan if satisfied. The loan amount arrives in your bank account directly, and you repay it to the lender directly in the form of fixed EMIs every month.
The P2P platform charges you a nominal fee to facilitate this transaction. That’s it; you have successfully borrowed the amount you require without approaching any bank, NBFCs or other intermediaries.
Here are a few Compelling Reasons why P2P lending is here to Stay:
- Includes borrowers who were previously neglected by banks and NBFCs
Traditionally, banks are wary of lending loans to small businesses and entrepreneurs. On the other hand, P2P funding doesn’t discriminate among borrowers and those who were rejected previously by banks can easily avail funding via P2P. This has led to the massive growth in popularity of peer 2 peer loans.
- Flexibility of investments
Conventional investments like mutual funds, fixed deposits and others have rigid terms and conditions. This made it difficult for first-time and small investors to invest. P2P, on the other hand, offers huge flexibility in terms of the investment amount as well as time period.
- The best interest rates for loans
When it comes to loans, banks and NBFCs charge exorbitant interest rates. P2P loans offer a better interest rate, when compared to other loan products on the market, since there are no middlemen involved.
- Transparency and Simplicity
Applying for a loan and getting it sanctioned at a bank involves having to deal with tons of paperwork and wading through pages of fine prints, annexure, sub-clauses and much more. With P2P, everything is simple, straightforward and 100% transparent.
The Last Word
In conclusion, P2P lending in India provides both lenders and borrowers with many benefits. Inflation-beating returns and fixed-rate loans make P2P funding an astute alternative to traditional banking. These factors and much more present a positive outlook for p2p financing and one can expect it to grow by leaps and bounds, in 2018.