Peer to peer loans, or marketplace loans have become very popular in recent times. P2P lending platforms have provided a way to connect people who need short term funds in a jiffy and people who may have excess funds lying idle and are looking to earn good returns on them.
With the increase in internet and smartphone penetration, marketplace loans, or online loans have grown rapidly. Online loans can be a great option even when you have a poor or a fair credit score. While traditional lenders such as banks and NBFCs may not approve your loan application because of your lower credit score, a P2P lending platform like LenDenClub may be able to help you get a loan online.
What is peer to peer lending?
An increasing number of people looking for alternate sources of credit and investment gave birth to this phenomenon called peer to peer lending. The logic is similar to a phenomenon that became popular in the late 90s called peer to peer file sharing, where users could share content online- get individuals to lend to other individuals through an online platform.
Companies such as LenDenClub operate such platforms so individuals can get instant personal loans online, from investors who have the extra cash and are willing to invest for a good return.
All that a borrower needs to do is sign up on the platform, upload some basic documents and list loan requirements. LenDenClub will then do a due diligence on the profile before listing it on its platform, so lenders can see the details and choose to invest in the loan. At any point of time, no confidential data of the borrower is disclosed to the prospective lender
The Benefits of P2P lending platforms
P2P platforms like LenDenClub have tried to make peer to peer lending as hassle free as possible. Such platforms facilitate investments by individuals by doing a due diligence on the borrower profile, recommending an interest rate commensurate with the borrower’s profile and also facilitate recovery. For the borrowers, they offer hassle free credit in a shorter time than other financial institutions.
Anyone can become a lender by registering on these platforms and giving some basic details. Lenders can choose to invest small sums (that could be as low as INR 5,000).
By choosing P2P lending platforms, lenders can be sure of monthly cash flows that are in the form of EMIs and these are credited directly to the lenders’ bank accounts. This helps them to compound their earnings in a short span and re-invest the same.
Platforms like LenDenClub also have recovery support and, lenders can be sure to receive help when there is a loan default or a delay in payment.
With such benefits, P2P is soon becoming the most preferred choice of investors..If you haven’t started investing yet, it is the right time to do so.