Why high-interest rates on loans by Z2P?
One of the most asked questions to me is why does Z2P charge 8.5%(monthly interest) on loans, which is quite high.
Just to give a comparison, banks usually charge 0.8%(monthly interest). Many other P2P platforms and NBFCs charge 2–3%(monthly). Comparing with these, we charge 5–10 times higher than other companies. The reasons?
1) We are not a bank — we credit analyse the lower spectrum of credit scorers!
We are a P2P company and most of the users that come to us are on the lower side of the credit rating spectrum, making it extremely critical to judge the borrower in order to safeguard the investment.
We, at Z2P, are very careful and robust in our credit analysis. We make sure that the lender’s money is only provided to the right individual who has the repayment ability. Now, this extra precision of our credit engine comes at a cost — for better data analysis & constant credit innovation.
2) Good Service means a cost
There is never a rule stating that loans should be given at low-interest rates. We believe in providing top of the class service to our lenders as well as borrowers. This high cost also helps us to sustain our business operations without needing to worry about increasing the loan-numbers volume just to meet our cost demands, exactly what other companies do. When you do not earn enough per loan, you tend to increase your loan volumes by giving loans faster and in this process, the quality of loans, as well as the service standards, degrade. (As you all know from the current bad-debt crisis with almost all the banks and NBFCs)
3) We deal in small size & tenure loans
We do understand that high interest on high loan amounts can lead to debt burdens. To counter that, we only provide loans of lower ticket size and tenure, thus making sure that the high-interest rates do not get you under debt.
4) Capturing the market is not our aim!
We do not want to provide loans to the entire country, instead, we cater to the people that we find the potential to repay our higher costs. Becoming the “Number-1” in terms of number-of-loans or active-portfolio is not our aim. We aim to become the “Number-1” company in terms of Return-on-Investment(RoI) & User Service.
5) Loan Recovery
We have the most robust loan recovery systems in place. We do not believe in just sending legal notices to the borrowers and transferring the burden of the collection to the lender, but, we take full responsibility till the time the money comes back to its lender. This entire automated and manual recovery process bolts a cost higher than other companies. This has also resulted in us having the lowest default rate across the country standing at just 1.2% for over 50000+ loans, where the industry average is 5%.
