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What is peer to peer lending? Another source for Start-up funding

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Peer To Peer Lending

Know More On Peer To Peer Lending

The most popular and the most preferred way of getting a loan is through a bank. A ‘bank loan’ has its own attraction. Though bank loans are preferred, not all end up getting it. Now, imagine a company that brings together lenders and borrowers based on the capital and interest rates. This company helps the lenders and borrowers reach an agreement. This type of lending by individuals to unrelated individuals with the help of private companies is what is known as peer to peer lending or P2P lending.

What is Peer?

Peer comes from the Latin word par which means equal. Anybody who you consider to be at your level can be called your peer. Similarly, you could be considered a peer in relation to someone. For example, if you are an employee in an IT company, your colleagues would be your peers. In other words, peer to peer lending is a concept which involves people helping people by lending money to each other. As long as an individual lends you money and not an institution it is called peer to peer lending. It is also popularly called as P2P lending.

Beginning

The first ever company to start peer to peer lending is an UK company called ZOPA in the year 2005. USSA saw its first peer to peer company in 2006. Peer to peer lending started to originate in India during 2012. The peer to peer lending in India is unregulated by the RBI owing to its nascent stages. Peer to peer lending in India is in its initial days yet. The regulations will start as the sector continues to grow.

Features

The peer to peer lending company will facilitate the entire process of money lending. The lender is helped by the company to find to a suitable lender. The company uses a reputed local collection agency in times of the borrower defaulting. Once the lenders are listed on the company’s database which are mostly online, it may take as soon as a single day to find a borrower or sometimes more than a month depending on the borrower’s preferences regarding the interest rate and the duration. The repayments happen as EMIs.

The peer to peer to company apart from finding borrowers for lenders, they also have their own verification system in place. Although the final judgment as to lend or not rests with the money lender.

The peer to peer lending concept is only going to grow and get bigger with the online facilities rapidly finding its way into interiors of India. It’s only a matter of awareness and computer literacy for the peer to peer lending to become the one of the mainstream ways of financing if not the mainstream way. While it has its advantages and a sense of no non sense approach, the idea is not entirely risk free as far the money lenders are concerned.

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12 COMMENTS

  1. Peer to peer lending can be a great option to earn higher rates of interest, it might even make you feel good about your savings. However, in such a system, the risks are also higher because there is no such regulatory authority. So even banks offer lower rate of interests, it is safer to put your money there.

  2. For peer to peer lending to be a mainstream financial tool,firstly, the security issues need to be taken utter care and secondly, the transactions need to be thoroughly monitored by the peer to peer company. Primarily, regulation of these two things can initialize and rise the use of peer to peer lending. Although, it would appear to be a less reliable method in the beginning but safe and easy transactions can help to bolster it’s reputation and usage as well.

  3. Peer-to-Peer lending is also known as crowd lending. Instead of borrowing from a bank, in case of peer-to-peer loans, you borrow from individuals. There might be a number of individuals online, who would want to lend you money on the basis of your credit rating. Peer-to-Peer lenders connect individuals and institutions with people who want to borrow. Debtors can now borrow based on their credit rating and receive personalized rates. Creditors can make regular income with attractive returns.

  4. This indeed is a fantastic option. And its really amazing to know there are companies who deal in these fundings. What is essential is for one to find out the in and out about the company and than about the list of lenders who lend money through them. Lenders also need to ensure that they have all the paper work in place as in today’s world you cant trust anyone with money. Before you go ahead and put your hand in something like this, ensure that you check the authenticity of the lender and the borrower to reduce your risks.

  5. Peer-to-peer lending involves a borrowing and lending transaction between the the borrower and the lender without the involvement of an intermediary. P2PL is a popular form of lending in many countries across the world, however, in India it is still in the growing stage and is not yet regulated. P2PL has many advantages like less fees, wide network of lenders, collateral free loan,etc. All these factors are beneficial for start-ups and can prove to be a motivational factor. All these factors make P2PL a convenient option of loan for all those who require quick money.

  6. Readers will get to know more about Peer to Peer Lending. The definition of Peer is illustrated in the above content. ZOPA was the first company to start this landing technique. The content also explains about how it started and the place from where it was originated along with some of its features.

  7. Gathering start-up fund is the most important part for any start-up. As much as it is a work of exertion, it is also a matter of risk. The article talks about another source of funding for the start-up which is Peer to peer lending. Written in a descriptive manner, the article is well written covering the important points.

  8. Basically crowd funding and peer to peer funding acts in the same way, but the reward we extend to the investors changes. Peer to peer is like money lending. It’s very informative to know that there are funding methods without the help/assistance of banks. New businesses will be evolved by funding like this in future.

  9. Peer to peer funding acts in the less risky way, but the profit we extend to the investors should be reasonable to improve the reputation of our startup. Peer to peer is a form money lending. It’s very informative to know that there are funding methods without the help of banks. New businesses will be evolved by peer to peer funding in future.

  10. Peer lending or lending from your friends or peers is the first type of lending we learn in life. An organized company, backing an individual lender involves less risk and more security for the lender. Though it is in its initial stage if developed it will be the next best way of borrowing money after banks.

  11. A new concept for me, which was clearly explained by the author. peer to peer lending is a good option as it has lesser rates of lending. It has yet to pick up in India but I’m sure in the future , it will. And I won’t be surprised if it becomes the foremost loan arrangement technique. The author deserves a big thank you for his insights in[to this new field which is going to become bigger in the future. Keep articles like these coming.

  12. Peer to peer lending is quite similar to the Kickstarter. An internet platform where young inventors can fund their ideas in order to actually make a product and launch it on the market. As banks regulations are sometimes very restricted, regarding the loans, it´s nice to now there are some other options in obtaining the money as well.

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