Peer to Peer lending (P2P) concept although new to the Indian investors and borrowers, gaining popularity at a rapid pace. The complex and time consuming processes by banks and strict conditions is increasing the interest of common people in it. The loan is in nature of unsecured personal loan and can be taken for purpose of house renovation, business expansion, marriages, medical expenses or any other personal expenses .On the other hand, it also provides opportunities to persons with extra cash to earn high returns than traditional deposits like PPF or fixed deposits.
Peer to Peer (P2P) lending is a concept in which borrowers directly connects with the investors through a platform. P2P platforms provide loans with a short tenure of generally 12 months to 18 months unlike banks which also provide loans for 15 or 20 years. i21funding.com is such platform and become one of India’s leading name in P2P lending industry.
Benefits of Peer to Peer lending
Less formalities and Fast processing as compared to banks – The formalities are very much less as compared to banks. The whole process is online and a lot faster.
Not high dependency on CIBIL Score – The banks takes a high consideration of CIBIL score while approving or disapproving your loan. So persons with a low CIBIL score may have hope in getting loan through this route.
High returns for investors – The investors gets a chance to earn more than fixed deposits. And investors also knows that whom they are lending and for what purpose the money will be used for. Also lending to multiple borrowers leads to diversification of investor’s portfolio and thus decreases the risk factor. Although investor can not withdraw their amount before the completion of tenure of the loan.
The thing which stands i2ifunding out of the crowd is their principal protection feature. i2ifunding is the only platform providing Principal Protection to the lenders. Extent of protection depends on the borrower risk category as given below
|Risk Category||% Protection|
i2ifunding.com has more than 200 lenders on its platform. Their principal protection feature decreases the risk of lenders to a substantial level. This makes it the best option for the lenders and they can invest as low as Rs. 5,000. The company is also providing legal support for recovery in case required, although the company claims that there is yet not a single case when the amount is not recovered in normal course . The borrower also required to deposit to the lenders un dated cheques for the interest and principal amount.
i2ifunding evaluates the credit risk of each borrowing request. The platform then assigns a risk category to the borrower which enables investors to make a well informed decision. The maximum loan that can be disbursed to the borrower is assigned considering their profile. It also recommends an interest rate for that borrowing but the borrower has an option to borrow at that recommended rate or at a higher rate . The interest rate can be as low as 12% per year.
On the other hand, investors have to create an Investor account and submit their KYC documents. The borrowers requirements are then made available to all the lenders on board. The lenders can choose borrowers and the amount they are willing to lend to that particular borrower. A lender can invest maximum of 20% of the loan amount to a particular borrower. This ensures that investors have a diversified portfolio and have limited exposure to one single loan.
And when the borrowers request is fully funded, their team performs a physical verification of the borrower. In physical verification all the original documents are verified and also a background check of the borrower is performed. After all the verification, loan agreement is signed by the borrower and he has to submit the undated cheques.
The repayment will be made in form of EMIs and have to be made by company’s highly secured payment gateway. The amount will be transferred to the investor’s account and they can reinvest the amount if they wish so.
An investor can invest up to Rs. 50,000 without payment of any fees. 1% of the amount is payable for the amount invested in excess of Rs. 50,000. The borrower has to pay a one time fee of Rs. 100 at time of creating account and Loan processing fees before their physical verification.
In India P2P lending is at its initial stage. Faircent, lendbox, lendenclub are some other P2P lending platforms working in India. Increasing internet penetration and increasing digital payment acceptance can take this industry to new heights. In India people are more dependants on family and friends for unsecured personal loans in case of emergencies. P2P lending can be a tool to remove this dependency and proves a boon to people with short term needs.