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.
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.
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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