The way we borrow money and the way we invest money is changing. Peer-to-peer a.k.a P2P lending continues to grow in popularity and is becoming a much more viable option for people who need money and also for people who want to invest their money.
Back in the day, if you wanted a loan, you’d go to a bank or a credit union, sit down with a loan officer, and wait for them to tell you yes or no as they crunched the numbers. But times have changed. Instead of going to banks and brokers, we simply go to each other. That’s exactly what peer-to-peer lending is all about, helping each other, rather than relying on big banks.
How P2P Lending Works?
In P2P lending, Borrowers get money without having to go through a bank, from lenders who are willing to lend their money by loaning their funds to other people for a nominal interest in return. The P2P lending platforms acts as a marketplace like the traditional broker, often working for a commission or other value.
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Peer-to-peer lending is a form of crowdfunding that offers personal unsecured loans to individuals and small businesses. P2P lending continues to grow in popularity and is becoming a much more viable option for people who need money and for people who want to invest their money. P2P lending is becoming a valuable choice for both as a borrower and an investor/lender.
How to Borrow from a P2P Lending platform?
Getting short-term loans can involve tedious documentation and high interest rates. Peer to peer lending platforms simplify the process of availing loans for short to medium terms.
Registration
To avail loan from a P2P platform, the borrower must register by filling up an online form that captures personal, financial and professional details. Registration fees may be prescribed by the platform to create a borrower profile. All documents mandated by the platform must be furnished to process the registration.
Listing of Profile
The borrower is required to mention the loan amount and the period for which it is needed. The profile will include credit rating, purpose of loan, etc. Next, the borrower’s profile is listed for prospective lenders to view. Once the borrower profile is created, the P2P platform will carry out credit verification.
Loan Assessment
Your financial stability, debt-income ratio etc. apart from other credit rating agencies are used to assess your true credit profile and then a recommended interest rate and risk category for the loan is determined. Higher the credit score, lower the interest rate applicable. If satisfied with the profile, the lender can choose to fund. Typically, a loan is funded by multiple lenders.
Disbursement
Once the loan is funded the disbursement takes place. Once the disbursement happens. The lender will transfer money to Escrow account and from Escrow Account money will be transferred to your bank account.
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Before that, a loan agreement is signed between the borrower and the lender. The loan agreement is typically a digitally signed agreement available for inspection upon logging into the profile of the lender or borrower.
Repayment
You need to repay the loan as per the terms mentioned in the agreement. Monthly payments in the form of EMI’s on agreed interest rates and tenure according to the legally bound agreement should be carried out.
P2P Lending Platforms
These are some of the many popular P2P platforms. See which peer-to-peer platform allows you to borrow money in your country. Each country and state can have its own regulations with regard to lending, peer-to-peer lending is not allowed everywhere. Therefore, ensure to check whether your country permits P2P lending before registering with a P2P platform.
- Prosper Marketplace
- Lending Club
- Upstart
- Funding Circle – For UK, US, Germany and Netherlands
- Faircent – For India
- Bondora – For Europe
- Kiva – An Non-Profit P2P Lending Platform
- WeLend – For Hong Kong Market
- Zidisha – For Africa
Now, Go Ahead and Grow your Business!
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