What is Peer-To-Peer (P2P) lending and how it works

Peer-to-peer (P2P) lending, also known as P2P loans, is a decentralised financial model that connects individuals looking for loans with potential lenders. In this digital age, P2P lending platforms act as intermediaries, facilitating direct lending between individuals and financial institutions. In India, the P2P lending market is regulated by the RBI. Explore how to go for P2P lending with its pros and cons. This alternative financing method has gained popularity due to its simplicity, accessibility, and the potential for more favourable terms compared to conventional loans.

✅ With a Bajaj Finserv Personal Loan, you can get the funds within 24 hours* of approval. Check your offer in just 2 steps and apply online to get our loan.

*Terms and conditions apply.

Peer-to-peer lending in India allows individuals to borrow and lend money directly via online platforms, eliminating the need for traditional financial institutions. Lenders earn returns through interest payments made by borrowers. RBI regulations ensure transparency and safeguard the interests of both parties involved.

1. Registration: Both borrowers and lenders need to register on the P2P platform. Borrowers provide information about their financial needs, while lenders create profiles indicating the amount they are willing to lend and the interest rates they expect.
2. Loan listings: Borrowers submit loan listings outlining their requirements, the purpose of the loan, and the interest rates they are willing to pay. Lenders can browse these listings and choose the loans that align with their investment goals.
3. Credit evaluation: P2P platforms often conduct credit assessments on behalf of lenders to evaluate the creditworthiness of borrowers. This helps lenders make informed decisions.
4. Loan approval and funding: Once a lender selects a borrower, the loan is approved, and the funding process begins. Multiple lenders can contribute to a single loan, spreading the risk among a diverse group of investors.
5. Repayment: Borrowers repay the loan amount along with interest in fixed instalments over the agreed-upon period. P2P platforms facilitate the repayment process and distribute the returns to the lenders.

Advantages

• Access to finance
  P2P lending offers an alternative funding option for individuals who may not easily qualify for traditional bank loans.
• Competitive interest rates
  Borrowers may find lower interest rates compared to standard personal loans.
• Portfolio diversification
  Lenders can invest in multiple loans, reducing dependence on a single borrower.

Disadvantages

• Default risk
  Borrower defaults can affect lender returns.
• Evolving regulations
  As a relatively new sector, regulatory norms may vary, which can impact investor protection.
• Technology-related risks
  Platform dependency on technology may expose users to cybersecurity or technical issues.

Check your eligibility for personal loan using just mobile number and OTP – 100% online process.

Peer-to-peer (P2P) lending in India is regulated by the Reserve Bank of India (RBI). The regulations include caps on lending and borrowing amounts, requirements for the platforms to obtain NBFC-P2P licenses, and guidelines for transparency, reporting, and grievance redressal mechanisms to ensure investor protection.

A viable and secure alternative to P2P lending is a personal loan. Based on your needs, you can go for a personal loan with features such as:

• Disbursal in 24 hours
• Easy online application process
• Flexible tenures up to 96 months
• Minimal personal loan documentation

In conclusion, P2P lending represents a disruptive force in the financial landscape, offering a viable alternative for both borrowers and lenders. While it comes with its features, borrowers need to carefully assess the pros and cons before making a financial decision.