HomeMedia CenterHow P2P lending platforms like Faircent, LendenClub are helping people make money

How P2P lending platforms like Faircent, LendenClub are helping people make money

Rajiv Yadav, who used to work for Bharti Airtel, started lending on peer-topeer lending platform Faircent a year ago. He plans to invest Rs 50 lakh in this channel and to make it his retirement plan. Yadav makes sure he lends only to salaried individuals and not more than Rs 50,000.

“I have burnt my hands in share trading. This investment is less risky and gives returns equivalent to real estate. Money will get doubled in three to five years,” he said enthusiastically. There are about 15 peer-to-peer or P2P lending platforms in India, facilitating unsecured loans, governed only by their internal policies. All these platforms have come up in the past 18 months, with at least three funded players, the largest being Faircent, which has raised over $4.25 million (about Rs 28 crore) so far.

Interest rates are decided by the users, while the lenders choose who they lend to and at what rate, and the borrowers choose from the offers they have received. On an average, the lending rates are 20-24%. Like Yadav, many Indians are attracted to this new investment avenue that promises better returns than banks and ensures returns on a monthly basis.

It is not everybody’s game though. Gurgaon-based Faircent, for instance, allows only people with property and experience in share trading to become lenders. “It is a risk-based investment, a complex product where people need to have a level of financial acumen to invest,” said Rajat Gandhi, the founder. Every loan on P2P platforms is shared by multiple lenders to reduce risk. Even if someone defaults on their monthly payment, these platforms have mechanisms in place to reduce the burden on the lender.

“The probability of default in our credit model is 0.1%,” said Bhavin Patel, founder of Mumbai-based LendenClub. “To protect our lenders even from that, we have created a lender protection fund, kept aside from our revenue.” This fund is used to repay what is owed to the lender even as the company’s lawyers take legal action for recovery. The most common legal action is to file a case of dishonour of cheque against the borrower (who has submitted post-dated cheques for his/her monthly repayments), as Faircent does.

Gandhi said the possibility of being charged with a criminal offence acts as an effective deterrent, as the one-year-old startup has never had to deal with an accruing default. Minimal documentation and quick processing of loans draw borrowers to these platforms, but these aspects raise serious concerns about the model. While both borrowers and lenders are verified, the source of the lender’s income and the use of the borrowed money cannot be questioned, as there are no regulations governing these entities.

Globally, the P2P lending market has been successful in the US, the UK and China. While the US and the UK have a handful of major players, China has thousands. China saw an uncontrolled proliferation of lending platforms in a short span and a fair share of failures. The government was forced to introduce regulations earlier this year.

Original Source… http://tech.economictimes.indiatimes.com/news/startups/how-p2p-lending-platforms-like-faircent-lendenclub-are-helping-people-make-money/50006277

LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping lenders diversify their investments beyond traditional investment instruments ever since.

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The Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by Innofin Solutions Private Limited, and does not provide any assurance for repayment of the loans lent through its platform.

LenDenClub is an Intermediary under the provisions of the Information Technology Act, 2000 and virtually connects lenders and borrowers through its electronic platform via the website and/or mobile app.

The lending transaction is purely between lenders and borrowers at their own discretion, and LenDenClub does not assure loan fulfilment and/or lending simple interest. Also, the information provided on the platform is verified or checked on the best efforts basis without guaranteeing any accuracy of the data/information verification. Any lending decision taken by a lender on the basis of this information is at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower, fully or partially. The risk is entirely on the lender. LenDenClub will not be responsible for the full or partial loss of the principal and/or interest of lenders’ lending amounts.

*This is an annualized yield and is subject to the maximum FMPP tenure, which is 5 years. P2P lending is subject to high risk and may cause an entire loss of principal.
 

*P2P lending is subject to risks. And lending decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

** Average value mentioned is the weighted average of simple interest received by lenders

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