Peer to Peer (P2P) Lending is a very new digital form of lending where individual borrowers and individual lenders directly get into a borrowing/lending transaction without any involvement of banks.
What is Peer to Peer Lending (P2P Lending)?
Historically, individuals or businesses who were looking for loans used to look at banks and financial institutions to get a loan. However, privately, many borrowers found loans in their local community with private individual lenders.
With new age peer to peer lending, now, borrowers are willing to explore P2P loans for alternative lending options. Since P2P lending happens directly between borrowers and lender, many times, better interest rates can be offered.
Peer to Peer Lending in India
Peer to Peer Lending has largely taken place informally in India for many decades. The jewelry shops and pawn shops in many cities have traditionally been active in this business.
Peer to Peer Lending in India with LoanSumo
The Reserve Bank of India (RBI) first bought a white paper on Peer to Peer Lending in April 2016. In it’s paper, RBI mentioned that there were 30 peer to peer lending companies in the digital space. In October 2017, RBI put out a paper to describe regulations. Based on RBI data available from June 2018, below are the five companies that have registered as P2P lending firms:
- Fairassets Technologies India Pvt. Ltd.
- Fincquare Fintech Pvt. Ltd.
- Bridge Fintech Solutions Pvt. Ltd.
- Bigwin Infotech Pvt. Ltd.
- OHMY Technologies Pvt. Ltd.
Benefits of Peer to Peer Lending in India
Traditionally, banks have not been very flexible with lending terms. However, with Peer to Peer Lending, because of new technology and the potential availability of many lenders, borrowers benefit in a few different ways
1. Simple Application Process
P2P Lending allows for simple and easy online application with fast approvals. All you need is a computer or a mobile phone to apply.
2. Competitive Interest Rates
With P2P lending, people who didn’t qualify for loans with banks and NBFCs now have another option to get a loan at competitive interest rates.
3. Quicker Loan Disbursal
With a completely digital online lending process, P2P lenders usually have faster disbursal rates than traditional banks and NBFC’s.
4. Higher Loan Disbursal Amount
Again, a P2P loan will enable the ability to get a higher loan disbursal amount because of a more diverse lending portfolio.