Peer-to-peer lending also referred to as P2P lending, is a form of direct lending of money to individuals or businesses. It works without an official financial institution participating as an intermediary in the deal. P2P lending is generally done through online platforms. 

P2P lending offers both secured and unsecured loans. However P2P lending websites connect borrowers directly to investors. The site sets the rates and terms and enables the transactions.P2P lenders are individual investors who want to get a better return on their cash savings than a bank savings account or CD offers. Secured loans are rare for the industry and are usually backed by luxury goods. 

It is also known as crowdfunding or social lending, P2P lending is gradually gaining popularity among borrowers and investors in India. P2P borrowers seek an alternative to traditional banks or a better rate than banks offer.

Features of Peer-to-Peer Lending
  • P2P lending system raises loans for individuals who don’t have access to traditional banking systems from persons who want to invest their money.
  • It extends credit to individuals who can’t avail it through financial organizations.
  • The system offers benefits to the borrowers as well as the investors. 
  • It facilitates people to borrow funds at low interest rates, it also enables savers to earn good interest on their saved amount.
  • The entire process is through online platforms and both parties register themselves and directly get connected. 
  • Only after proper assessment, the members can participate in the transactions.
  • Reserve Bank of India regulates all peer-to-peer lending platforms 
Benefits of P2P Lending
  • P2P borrowers can enjoy lucrative cost advantages compared to the rates offered by a bank or other financial organizations.
  • The process of getting a loan from P2P lenders is very fast and hassle-free. 
  • These sites render services in a very short period with minimal documentation. 
  • Since they have an essence of community service, it is easy to exchange information and most of the users are very happy with the way how these sites work.
  • The peer-to-peer lending system is more focused and convenient when compared to the loan application formalities mandated by the banks and other formal lending organizations.
How does peer-to-peer lending work?

All the transactions are carried out through an online platform. The steps below describe the P2P lending process:

  • A interested applicant can complete an online application on the peer-to-peer lending platform.
  • The platform assesses the application and determines the risk and credit rating of the applicant. Then, the applicant is assigned the appropriate interest rate.
  • When the application is approved, the applicant receives the available options from the investors based on his credit rating and assigned interest rates.
  • The applicant can evaluate the suggested options and choose one of them.
  • The applicant is responsible for paying periodic (usually monthly) interest payments and repaying the principal amount at maturity.
What are the Advantages of P2P Lending?
  • It is entirely up to the lender whom he wants to give loan and whom not.
  • Peer-to-peer lending system doesn’t follow traditional financial institutions and banks.
  • The poor CIBIL score and low monthly income will not be a factor.
  • Through this platform, people with a very poor CIBIL score and low income can get personal loans from multiple lenders at low-interest rates and flexible terms. 
  • Since the borrowers can directly negotiate with the lenders, sometimes they get loans at a lesser rate than the banks.
  • With minimal documents, the borrower can avail loans from the lenders available on the website.
  • The lending and borrowing process is based on the mutual understanding between the borrowers and the lenders.
  • The processing time is fast, and the borrowers needn’t wait for a long time for the loan to get approved and disbursed like the traditional banks.

Use Finline online tool for making the project report to submit to the lenders.