An umbrella term that embraces an extensive scope of activities that are based on digital platforms including the best p2p lending platforms and other lending types that is internet based is known as “sharing economy.” On the side of the lender, not only could peer-to-peer (P2P) lending be used to leverage little amounts of money, but also could be utilized to push for financial democracy as well as inclusion on the part of the lender and borrower.
P2P lending is the manner of lending individuals or businesses money by means of online services wherein lenders and borrowers are matched. Because companies that offer peer-to-peer lending mostly run online, they could operate with lesser overhead as well as offer the service more inexpensively compared to conventional financial institutions like banks.
The Process of P2P Lending
Applying for short-term loans can encompass tiresome documentation as well as higher interest rates. Platforms for P2P lending make the process of availing short to medium term loans simpler.
Registering to the P2P Platform
When applying for a loan from a P2P platform, a borrower should be registered by filling a form online that secures professional, personal and financial details. The P2P platform may specify a fee to be able to register and generate a borrower profile. Every single document required by the platform need to be provided for the registration to be processed.
Verification of Credit
Borrowers need to state how much the loan is and when it is needed. As soon as the profile of the borrower is generated, the P2P platform will verify the credit of the borrower. The interest is reliant on the credit score arrived at by the credit verification process. A greater credit score would imply a rate of interest that’s lower.
The profile of the borrower is then listed for potential lenders to look at. Included in the profile are the borrower’s credit rating, what the loan is for and more. A lender could choose to fund a borrower if their profile meets their expectation. A loan is usually financed by four to five lenders.
Disbursement happens as soon as the loan is financed up to 75. Prior to that, an agreement or contract between the lender and the borrower is signed. The borrower needs to provide the necessitated number of cheques that is post-dated for loan disbursement. Usually, the loan agreement is signed digitally and is accessible for examination when logged into the profile of the borrower or the lender. The cheques that are dated function as protection for the P2P loan.
Paying Back the Loan
The borrower is required to register a directive in the National Automated Clearing House or NACH to debit the account of the borrower automatically with the EMI amount in lenders’ favor.