P2P platforms help easy lending, borrowing

Few people these days manage without borrowing money for urgent needs. Many are willing to take money, whether there is any need or not. Also, there are those who face many hurdles because there is none to lend them money when in need. In this context, it is useful to learn about Peer to Peer (P2P) lending, where loans are available freely. Also, they are good platforms to lend money and earn satisfactory returns.

There are many P2P platforms where lenders and borrowers come together. This facility is available in the form of websites and apps. For example, they function in a similar manner as marriage brokers, who bring both the parties together. P2P lending system is still in a nascent stage in our country. P2P platforms are much less in number, when compared to conventional lending systems.

Normally, before sanctioning a loan banks and other financial agencies look at the credit score of the borrower. In P2P system, credit score is not the only criteria. Their profiles on social media, purchases on eCommerce sites, nature of clearing pending bills, present occupation etc., details are taken in to consideration.

• Loans offered through P2P platforms should not be for more than 36 months.
• The amount that is lent via P2P platform should not be more than Rs. 10 lakh. Loans can be offered to any number of borrowers. But the whole loan amount should not be over Rs. 10 lakh.
• Even borrowers cannot accept a loan of more than this amount
• A lender can offer a maximum of Rs. 50,000 per borrower.
• They should be offered as unsecured loans. No sureties of any kind should be demanded. Loans have to be offered, unconditionally, without any kind of surety, bond or mortgage.
• P2P platforms should not lend on its own. It should not accept deposits.

Borrowers and lenders should first register themselves on P2P platform. For this, it is necessary to pay a fee in the beginning. While registering their names, kyc documents (address proof, Aadhar, PAN, bank account etc.) should be submitted. The P2P platform will then review their ID and other eligibilities.

P2P platforms allow borrowers to give post dated cheques in the name of the lenders. They also help in collecting the repayments. But they do not stand as surety for the lenders. Any risk in lending has to be borne by the lenders themselves. P2P platforms are limited to the role of catalysts, communicating between both the parties, providing information, helping in agreements, amount transfer, collecting repayments, etc., services. They get their revenue from the fee that is paid by the members. If the borrowers default on repaying, lenders will have to bear the losses. If money is lent to a high risk borrower, the interest earned is high. But defaulting risk too is high. Owing to this risk factor, some P2P platforms have begun a Protection fund, to save lenders from these losses.

Also, those who have surplus funds and wish to invest them for gain, can register themselves as lenders in P2P platforms and start lending. They can earn interest amounts. There are money lenders around us. It is an ancient practice in India to lend money to close associates and collect interests. P2P platforms have taken this practice to the next level, by creating a secure atmosphere for both the lenders and borrowers. The lenders and borrowers on these platforms need not be known to each other. There is no need to introduce one to the other. The only criteria here is their credit risk. There might be processing and such other fees. Processing fee is usually one per cent. P2P platforms decide as to which lender or borrower to permit and vice versa.

Small and medium businesses faced difficulties in borrowing after demonetisation. This led to the increase in lending on P2P platforms. The number of those who wish to increase their gains, through lending, have an advantage on P2P platforms. That is why it has become an alternate means of investment.