All P2P platforms come under the purview of RBI regulations. All players are required to register for a NBFC-P2P license to provide P2P lending services.
The P2P lending arena continues to expand with newer players like Cred and BharatPe entering the fray. Here are the five critical points of this new field.
1. How do P2P platforms work and what do they offer? Peer-to-peer lending is a mechanism which connects individuals in need of credit with others willing to lend. The platforms purely acts as an intermediary or marketplace that connects borrowers and lenders. You can register as a borrower or lender on any platform after undergoing a verification process by furnishing relevant details. As part of the process, borrowers will have to undergo a risk evaluation and pay a flat registration fee. Once registered, investors can reach out to listed borrowers and vice versa. Some P2P platforms will automatically make lending offers to borrowers that match your loan criteria on your behalf, while others will require you to do it manually.
All proposals are accepted on first come, first serve basis. The rate of interest typically ranges from 10% to 28% and the loan tenure may range from 3 months to 36 months. Once an agreement is reached between the borrower and the lender, a legally-binding contract is signed by them digitally. The loan amount is then transferred to the borrower’s account and the borrower makes periodic repayments via EMI over the stipulated time period. If a borrower fails to pay an EMI within a stipulated time, a penalty is levied on the borrower and is payable to the lender directly.
2. How are borrowers evaluated? Continue Reading →