How Can Peer to Peer Lending Be a Boon?
By Anupama Deshpande | Jan 4, 2019

Banks, NBFCs and many other financial institutions lend money for various purposes based on different needs of their customers. There is one another method of lending which is known as Peer to Peer Lending or P2P Lending.

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Peer to Peer Lending or P2P Lending enables people to borrow and lend money without the use of any financial institution as an intermediary. In P2P lending, there are two types of persons, one who wants to borrow money and another one who wants to lend money.

Peer to Peer Lending can be understood as crowd funding from the people who want to lend. It uses a single online platform where the borrowers as well as the lenders need to register themselves.

Now as per RBI's recent guidelines, Peer to Peer Lending Platforms will be considered as non-banking financial company (NBFC) that will be regulated by the RBI.

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• Savers will earn higher interest by lending their money as compared to simple saving. In this, lenders can get 2 to 3 times more returns as compared to bank's Fixed Deposits or Recurring Deposits.
• Using this platform, borrowers will be able to get comparatively lower interest rates than they get in traditional options.
• Those borrowers, whose loan applications have been rejected by traditional lending institutes, can apply for loan under this platform and can get the loan.
• Both the borrowers and the lenders can make negotiations on interest rates.
• Borrowers will not have to go through tedious and time-consuming loan approval process to get loans from banks and other financial institutions.

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• There is no middleman or intermediary involved under this platform.
• It facilitates faster loan processing.
• It will be regulated by the Reserve Bank of India (RBI).
• Lending business is expanded to untapped segment of the country.
• Generally, there is no prepayment penalty is taken under P2P lending.
• Lenders and borrowers enjoy the control over the terms of loan.

P2P lending platform is good but still it should be kept in mind that this type of lending consists of risk related to borrower defaulting on the loans taken out.