Peer-to-peer lending platforms allow all clients to meet their short term requirements. The temporary necessities may be a medical crisis, home or office construction, traveling plans, or more. Comparing to any bank or other traditional borrowing system, people find it easier to take loans through the P2P lending system. As the procedure to borrow loans are quite short and straightforward in the P2P lending. Many investors are putting in P2P credit at the cost of a higher risk to get a maximum return and considerable profit. Let us give a brief of P2P lending system and how it works:
What is peer-to-peer lending?
P2P lending works as a connecting platform between the borrower and lender, where they can directly link through online medium. Borrowing in a peer-to-peer lending system is an unrestricted action where lending and borrowing money becomes quite convenient. Compare to bank loans, through P2P lending; the borrower can expect to get a much lower interest rate on the amount they borrow. On the other hand, the lenders also manage to get a much higher return than investing through bank lending provision. The loan tenure in P2P lending can range from 3 months to 3 to 5 years.
How to get started with the process of lending and borrowing in a peer-to-peer lending system?
Get yourself registered on a P2P platform. The process is done by filling up an online application form.
Here you need to provide a scanned copy of your identity proof like driving license, ID, passport, or other such documents.
Some of the P2P lending sites may also ask you to provide your social media link, so they can briefly analyze your profile. However, the borrowers need not provide their social media profile, yet, those who manage to put it on their P2P profile can improve their chances of receiving better interest rates as it indicates better assurance for the deal.
Once you provide all the details, your profile will be verified thoroughly.
On the approval of authorities, your profile will register with the P2P lending website where numerous lenders can view your prospectus and offer you the loan
To start working with the lending or borrowing procedure, you must first log in to the system through your verified mobile no. or email address and password.
Some of the crucial aspects that lenders must check out before registering in any P2P platforms are –
One of the critical factors that a lender must look for is the credibility of the particular lending platform, smoothness, and clarity of the procedure, defaulter rate of the platform. After getting the clarity about the system, then only you must select which platform you must work with. To gather a detailed review of some of the most popular or new P2P lending platforms, many lenders and borrowers relay on some of the significant and honest review sites. Crowd Reviewed is one such trusted name in UK and Europe for gathering numerous P2P lending platforms’ editor and public review. As per the website’s survey, the reviews of Bondora are quite considerable. You can visit Crowd Reviewed to enrich your knowledge of numerous financial products and their credentials in the market.
Things borrowers must know before they start working in the system –
Before applying for a loan or investing in any P2P lending platform, you need to gather detailed information about the interest rates they are referring to the borrower and how much return the investor can expect. Make sure to check if the platform is using any additional or hidden charges.
The annual interest rate that is charged varies from the borrower to the borrower. After checking the credit profile requirements of the borrower, the P2P lending authority decides what interest rate is suitable for a particular borrower.
A few P2P lending platforms can also charge an additional processing fee. It can be 3 to 5% from the borrowers and 1 to 2% of the investment amount from the lender. These charges can vary from platform to platform.
Why should you invest in peer to peer lending?
P2P lending is a promising platform for lenders and borrowers throughout the world who are looking for some reliable and hassle-free loans. These platforms charge a tiny amount from the borrower to help them find a matching lender. No other bank or financial platform can give you such a profitable deal. This characteristic makes peer lending the best financial aid providing platform for many small businesses. P2P lending gives you a chance to exclude the role of a bank and take charge in your hand. You can simply lend and borrow money through this system according to your rates. These feathers of peer to peer lending make it unique and money-making.
How peer-to-peer lending is Unique from the traditional lending system?
The main difference between traditional methods and P2P lending lies in the type of funding; P2P funding is a particular version of the traditional funding system. The two differ in processing and duration time too. The conventional funding system, through loans from a bank, usually has a period of one to five years. The amount with interest has to be paid within several installments. But in the case of P2P lending, the duration usually becomes shorter between three months to thirty-six months. And it is one of the main reasons for the pull of borrowers in this system of funding.