While P2P platforms are gradually getting visibility, there is no regulation in place for such lending. While the RBI is constantly monitoring the growth of P2P lending, the borrowers and lenders remain at high risk until RBI comes out with a clear regulation policy.
If you are looking to raise funds for your business, bank loans are easily available under various lending schemes. However, procuring banks loans for business is not a cakewalk since business loans form a high risk category for banks.
So, if you are hoping to borrow funds without any collateral security or for a unique project which the bank may consider as high risk, you can consider a newly emerging alternative—peer-to-peer (P2P) lending, which is slowly becoming an acceptable alternative mode of lending. The numbers of P2P lenders have increased substantially, even attracting investments from angel investors.
Peer to Peer, or P2P, lending is a new concept in India, but has been active in the developing world for quite some time. It is based on the basic principle that you as a borrower get funded by multiple individual lenders. Therefore, unlike traditional loans, instead of borrowing one lumpsum from one lender, you borrow smaller amounts from multiple lenders.
So for example, if you need Rs. 5 Lakh for a project or for some commercial activity, you disclose your requirements on a P2P lending platform and investors willing to invest in your project will fund your project. The P2P platform will charge a processing fee from both the borrower and the lender.
Loans on offer by P2P Lenders
P2P lending offers micro finance, consumer loans and commercial loans. Personal and education loans are also available through P2P lenders under consumer loans. The popularity of P2P lenders, however, is for commercial loans where individual borrowers and lenders support one another financially.
Loan amount and interest rates
While there is no common body regulating the working mechanism of P2P Lending, each P2P lender has a different cap on the loan amount and interest rates. On an average, you can hope to get a personal loan between Rs. 25,000 to Rs. 5 Lakh. The upper limit for commercial loans can be as high as Rs. 30 Lakh. The loan tenure ranges from 6 months to as many as 5 years. Interest rates can be quite high and are in the range of 12-36% depending on the type of loan, the loan amount and tenure.
Working operation of P2P lending
To apply for a loan, you will need to register with a P2P lending portal. You can also sign up as a lender if you wish. To be eligible as a borrower, the P2P portal seeks your details, including your educational details, financial details, and employer details, etc. The portal will then check your credit worthiness by checking your credit reports like CIBIL etc, as part of their in-house verification.
Once the P2P lending portal verifies and lists you as a borrower, you will have to disclose all details, including the type of loan you need, the work you will be doing once you get the loan and all other details a possible lender should know. If any lender gets interested in funding you, he will approach you through the P2P portal.
RBI and regulatory concerns
While P2P platforms are gradually getting visibility, there is no regulation in place for such lending. While the RBI is constantly monitoring the growth of P2P lending, the borrowers and lenders remain at high risk until RBI comes out with a clear regulation policy.
For example, a borrower can go to multiple P2P lending portals and sign up and avail multiple loans for the same project. Any loans taken from P2P lenders will not get reflected in your credit score, which is again a high risk proposition for lenders. Each lender can offer you a loan at a different rate of interest as there is no regulation policy common for all P2P portals.
What you should do as a borrower or lender
Borrowing from banks or NBFC is a safer way of borrowing as compared to P2P portals. If you are still looking at P2P loans, or to register yourself as a lender, make sure you read the terms and conditions of the portal in detail. Each P2P lender will have different terms and conditions, so make sure you are fully aware of what you are getting into. Since there is no safety net for P2P lending, make a P2P loan your last priority unless RBI regulations are put in place.
P2P lending is gaining popularity and is a great way for people to raise money without the need for collateral security. However, without RBI regulation, such lending and borrowing remains a high risk affair.
Author:-www.moneycontrol.com
Reposted By:- Credit 4 Loan
If you are looking to raise funds for your business, bank loans are easily available under various lending schemes. However, procuring banks loans for business is not a cakewalk since business loans form a high risk category for banks.
So, if you are hoping to borrow funds without any collateral security or for a unique project which the bank may consider as high risk, you can consider a newly emerging alternative—peer-to-peer (P2P) lending, which is slowly becoming an acceptable alternative mode of lending. The numbers of P2P lenders have increased substantially, even attracting investments from angel investors.
Peer to Peer, or P2P, lending is a new concept in India, but has been active in the developing world for quite some time. It is based on the basic principle that you as a borrower get funded by multiple individual lenders. Therefore, unlike traditional loans, instead of borrowing one lumpsum from one lender, you borrow smaller amounts from multiple lenders.
So for example, if you need Rs. 5 Lakh for a project or for some commercial activity, you disclose your requirements on a P2P lending platform and investors willing to invest in your project will fund your project. The P2P platform will charge a processing fee from both the borrower and the lender.
Loans on offer by P2P Lenders
P2P lending offers micro finance, consumer loans and commercial loans. Personal and education loans are also available through P2P lenders under consumer loans. The popularity of P2P lenders, however, is for commercial loans where individual borrowers and lenders support one another financially.
Loan amount and interest rates
While there is no common body regulating the working mechanism of P2P Lending, each P2P lender has a different cap on the loan amount and interest rates. On an average, you can hope to get a personal loan between Rs. 25,000 to Rs. 5 Lakh. The upper limit for commercial loans can be as high as Rs. 30 Lakh. The loan tenure ranges from 6 months to as many as 5 years. Interest rates can be quite high and are in the range of 12-36% depending on the type of loan, the loan amount and tenure.
Working operation of P2P lending
To apply for a loan, you will need to register with a P2P lending portal. You can also sign up as a lender if you wish. To be eligible as a borrower, the P2P portal seeks your details, including your educational details, financial details, and employer details, etc. The portal will then check your credit worthiness by checking your credit reports like CIBIL etc, as part of their in-house verification.
Once the P2P lending portal verifies and lists you as a borrower, you will have to disclose all details, including the type of loan you need, the work you will be doing once you get the loan and all other details a possible lender should know. If any lender gets interested in funding you, he will approach you through the P2P portal.
RBI and regulatory concerns
While P2P platforms are gradually getting visibility, there is no regulation in place for such lending. While the RBI is constantly monitoring the growth of P2P lending, the borrowers and lenders remain at high risk until RBI comes out with a clear regulation policy.
For example, a borrower can go to multiple P2P lending portals and sign up and avail multiple loans for the same project. Any loans taken from P2P lenders will not get reflected in your credit score, which is again a high risk proposition for lenders. Each lender can offer you a loan at a different rate of interest as there is no regulation policy common for all P2P portals.
What you should do as a borrower or lender
Borrowing from banks or NBFC is a safer way of borrowing as compared to P2P portals. If you are still looking at P2P loans, or to register yourself as a lender, make sure you read the terms and conditions of the portal in detail. Each P2P lender will have different terms and conditions, so make sure you are fully aware of what you are getting into. Since there is no safety net for P2P lending, make a P2P loan your last priority unless RBI regulations are put in place.
P2P lending is gaining popularity and is a great way for people to raise money without the need for collateral security. However, without RBI regulation, such lending and borrowing remains a high risk affair.
Author:-www.moneycontrol.com
Reposted By:- Credit 4 Loan
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