InvestorQ : What are the features of peer-to-peer lending?
Kalyani Sundaram made post

What are the features of peer-to-peer lending?

Pratik vyas answered.
3 years ago

Peer-to-peer (P2P) lending has been gaining a lot of prominence in India. It is a good alternative to the usual borrowing options provided by the traditional banks and non-banking finance companies (NBFCs).

Peer-to-peer (P2P) lending is a form of crowdfunding which is used to raise money for those individuals who either don’t want to borrow funds or can’t get it through traditional lending organisations. This relatively new lending avenue discards lengthy formalities of form filling, providing numerous documents, etc. Not only does a borrower enjoy minimum documentation in P2P lending, it also generates returns for those individuals who have extra, idle money to be mobilised.

Special features which make the peer-to-peer lending system stand out from the other informal lending options are:

- P2P lending system helps raise loans for individuals who don’t have access to traditional banking systems from persons who want to invest their money.

- By eliminating the need for a banking system or a financial intermediary in the entire borrowing and lending process, it extends credit (funds) to individuals who can’t avail it through financial organisations.

- P2P lending offers benefits to borrowers as well as investors. The way it does this is by allowing people to borrow funds at low-interest rates, while enabling lenders to earn a good interest on their saved amount.

- Lenders as well as borrowers have to register themselves and connect with each other online. Only after doing a proper assessment are all members allowed to participate in transactions.

- Since October 2017, the RBI has started recognising every peer-to-peer lending platform as a non-banking financial organisation.