Alternative Investment : Peer to Peer Loan

Photo credit Business Insider

Generally financial Institutions will lend the money, received Deposits. But in this Process, They receive their margin, which in some cases, sufficient big. That makes bad picture. Like if I deposited $100 Million. Assuming that for one year, I will receive 7% interest. If bank lend this money to others, they will earn more than 10% if that is industrial. (Indian Rates, only for example, rates may change bank to bank.) So how can depositor increase his Return and borrower will reduce his rate if he is ELIGIBLE? (Assuming Credit Rating score is Good)

Peer to peer loan is one way. And as we are living in E-Commerce era. It is very easy to do it. Faircent.com, i-lend.in are some of the example where peer to peer loan is available in India.The last decade has witnessed a havoc rise in the online social community which has revolutionized communication across boundaries. Integrating social networking with financial services has given birth to peer-to-peer lending. Connecting users online, P2P lending enables both borrowers and lenders interact on the same platform. Markets like USA have adopted the concept of peer-to-peer lending and numerous financial organizations are successfully operating in that space. In India the concept is new and P2Plendingindia.com has initiated to introduce it to the home market. The Indian lending market is huge and there is great potential for the concept of peer-to-peer loans to be a success. Also the rising need for small loans is paving the way for peer-to-peer loans. Financial institutions seldom allow small loans and if borrowers are looking for lesser than Rs. 50,000, getting a loan can be tough. Peer-to-peer comes with number of benefits for both investors and borrowers. From education to travel or debt consolidation, P2P lending can be of great help, in times of need!

Why to invest? For lenders its chance to earn up to 24% via debt instrument. You will find credit worthy peoples to lend money. The Website or the facilitator will take care with checking the credit score. Best thing is you will earn monthly payment via EMI mode. It is big help for some fixed income peoples. Most of the times it helps to diversify among numbers of borrowers. For a borrower it is way to access cheap personal loan. Possible to borrow for any reason. Funds available quickly. Hardly any long paperwork is needed.

How it work? From easyrupiya.com EasyRupiya.com provides a marketplace for borrowers and lenders. It enables them to interact and come to their own loan agreements. Borrowers may require funds for personal or business use, while lenders may be seeking higher returns than traditional forms of finance. Investors can be from anywhere in India, however, at this stage, borrowers must be from Mumbai. Once an individual or entity registers on our website, we carry out a thorough verification process of all the details provided. This verification is similar to the KYC processes carried out by any bank to fulfill RBI norms. We carry out a physical verification of the borrowers as well as crosscheck their documents with multiple databases to prove validity. Therefore, lenders can be assured that all borrowers that appear on the platform are authentic and have been verified to the best of our ability. Once lenders and borrowers are registered and verified, they can start interacting with each other on the platform. Lenders can view all financial details of the borrowers and make informed decisions on whether or not to fund their requirement. Lenders may ask public or private questions to gain further information from the borrower. Lenders can offer a portion of the amount or the entire amount to borrowers. However, best peer-to-peer practices suggest lenders should diversify their investments to minimize risk. Once terms are agreed and the borrowers listing has been fulfilled, a formal contract is signed by the two parties. Funds are then transferred to the borrower and repayments are made through post-dated cheques. We are working hard to enable online fund transfer in the near future. All repayment details can be tracked through the investor’s dashboard. EasyRupiya at no point holds or transacts any of the funds in the transaction. We only provide the platform that enables the two parties to come to their agreement. We charge an upfront fee to facilitate the entire process. Further details about rates and fees can be seen on the borrower and investor pages.

EDIT : RBI as on 4 October 2017 issued guidelines for Peer to peer loans. BloombergQuint in its tweets explains it very well. 

 

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter