Indian P2P Lending Platforms Are Helping The Un-catered Borrowers Get Access To Easy Finance

With traditional banks and financial institutions denying more and more personal and small business loans, people are becoming more interested in non traditional avenues of finance such as online peer to peer lending. For example, if your bank denies you a loan due a procedural and theoretical approach you could go to an online P2P Lending platform to get assessed and get a quick and hassle free loan.

P2P Lending platforms offer help to a segment of the population that otherwise might not be able to get a loan the traditional way, without any hidden costs.

Peer-to-peer lending (P2P) provides a type of unsecured personal loan that allows credit worthy individuals borrow money from retail investors through an online lending platform like Lendbox. The P2P lending platforms act as an intermediary between the two sides, the investors and the borrowers.

This is an industry that’s gaining popularity rapidly in India as there are already over 30 platforms operating in India. The reason for the massive popularity of these platforms is that p2p is a great investment opportunity for people looking to invest their savings and earn great returns also a great way for creditworthy borrowers to secure quick and easy personal loans.

In traditional bank loans, a potential borrower goes to the financial institutions and banks and applies for funding whereas; in peer-to-peer loans borrowers connect directly with people looking to invest their surplus money. Borrowers still need to be honest with the platforms and investors as to what they’re going to use that money for, but with peer-to-peer loans there is far less paperwork and bureaucracy to deal with.

Unlike traditional lenders, there are no penalties or hidden charges or higher interest rates for those loans that might be traditionally deemed as riskier like paying off your credit card or a marriage or medical bills.

P2P lending in fact is a boon for borrowers and investors alike because of the various benefits it offers to loan takers: –

1) Quick and easy application process

Fill in a quick online application form and you can be approved for a loan within minutes. The process of loan applications at banks is long, tedious and physically and emotionally taxing. While online platforms have a quick 10-minute registration process, without you having to wait in long lines and without you having to talk to 10 different bank officers.

2) Competitive interest rates

P2P lending websites these days offer really low interest rates especially compared to informal forms of lending, and also competitive with what the banks are offering these days. Of course the exact interest rate depends on what platform you choose, how risky your profile is, your credit history etc. But p2p platforms are also able to finance loans at interest rates of as low as 12%.

3) High funding velocity

Third, is the velocity of funding, it typically takes one to three weeks depending on the size of your loan to get it sanctioned from regular banks. But at Lendbox has been able to fund loans of as big as Rs. 5,00,000 within 4 days.

4) Ability to tell your story

Banks take a very black or white approach to loan applications ─ if you have a bad CIBIL score, there’s a good chance you won’t get a loan, and if you do, it will likely come with a high, prohibitive interest rate.

However, P2P lending gives you the chance to explain why you have poor credit history(if it is bad), P2P Lending platforms employ sophisticated algorithms and big data engines to ensure an accurate character profiling is performed on the borrower, this allows investors the chance to better understand each profile. So even if your CIBIL score isn’t that great, there are high chances of you getting loans through P2P platforms at reasonable rates if you have full intentions to repay the loan.

5) Significantly cheaper than credit cards

Taking a loan from a P2P website to pay off your credit card debts can actually save you a lot of money. If you’re able to get a lower interest rate on a P2P loan, you can pay off your credit card and get out of debt in a much quicker time period. In fact, borrowing from P2P loans can be up to 70 percent cheaper than credit cards.

6) Low late payment fees and no prepayment fees

You’ll find that these online platforms generally charge lower fees than that charged by banks and credit card companies for your initial boarding. There is just a one time minimal fee and no annual fees/hidden charges. Another highlight of borrowing from these platforms is that you can pay your loan off early and not be penalized for it. Many banks actually charge you extra for paying back the money ‘too quickly’ which you can avoid with P2P platforms. There is no such thing as repaying the debt too quickly here.

This article originally appeared on Tech In Asia