Peer-To-Peer Lending, a Brief Overview
Credit Financing is a crucial part of the economy. In India, the importance of various credit options gained popularity with the advancements in technology over the past 2 decades. And with the upcoming age of Digitization, Peer-to-Peer Lending has intrigued quite an interest in the current financial landscape.
Know the Process.
Peer-To-Peer Lending (P2P) has two parties involved, Lenders & Borrowers.
P2P simply means lending capital in the form of Loans directly to a borrower, without the involvement of a middleman aka Banks.
1. How do banks earn revenue?
Capital invested in the form of FDs, usually gains 5-6% per annum from the bank. The same amount is lended out to borrowers on high interest rates with an average of 12-13%. This huge margin in between the percentages is the revenue earned by the banks
To reduce these margins P2P Lending was introduced, and through this vehicle the gap between the interest rates is closed with mutually negotiated terms. This increases the revenue earned by the investor and decreases the interest rates to be paid by the borrower when compared to banks.
2. Involvement of NBFCs.
Investing through these Non-Banking Financial Companies(NBFCs) have their own advantages. NBFCs take a very small fee for management of your funds and provide complete collateral on the loans issued. This ensures a near-zero risk of default.
One can usually earn 13-15% per annum through these NBFCs.
3. Auto-Deployment of Capital
Lenders can auto-deploy their capital to various borrowers. One can choose a lock-in-period with a mode of repayment. There are two modes of repayment: Growth and Monthly Repayment.
Growth Repayment will compound your profits and reinvest the same for more returns. It is commonly known as Cumulative returns.
Monthly Repayments give out timely repayments on the fixed value. It is commonly known as Non-Cumulative Returns.
On investing, your Capital will get distributed automatically, this is done to reduce the risk of default. Only 1.5-2% of your capital will be lended out to a borrower.
Want to earn more?
Want to earn high returns in a short period of time?
Introducing Micro-Loans; These are short-term loans with a time period of 1-3 Months. There are high interest rates set on these loans. One can earn 35-125% with-in a year.
So what’s the catch?
These loans have no collateral on them & are given to borrowers with low credit scores who need the amount for various uses. Before lending an Investor can see the Borrower’s profile, amount of Loan required, purpose of Loan, interest rate, tenure etc. It is not necessary to deploy your whole capital on one borrower, you can diversify your portfolio by assigning specific percent of your capital to each borrower, this also means that the lenders can pool their money for one loan.
Scope of P2P Lending
● According to estimates, the P2P market will reach $5-7 billion by 2022. P2P platforms will provide financial services to a significant percentage of the unserved market.
● Due to the ease of the P2P loan application process, people that are currently using banks to meet their financial needs might consider P2P lending platforms instead.
● Several countries, including the UK and the US, have observed this trend, where peer-to-peer lending platforms have been gaining traction over banks.
● P2P platforms are providing significant returns to lenders on these platforms, and this will continue as they add more controls and processes to keep NPAs in check.
● RBI’s support will allow P2P lending to progress to the next phase of market adoption in lending money online. All these factors only state that platforms for peer-to-peer lending are here to stay.
Why should you invest in P2P Lending with OwnersTown
We place great importance on credit evaluation. As part of our automated in-house credit evaluation process, we have developed a model that analyzes data from credit history, bank balance statements, etc. in real-time. Each loan proposal is segregated by our credit review team into the corresponding Risk Category.
We offer Peer to Peer investment opportunities to lend Capital to borrowers on Mutual interest rates through OwnersTown. With us, investors receive yearly fixed returns on investments that start from the minimum of 20,000.
Hence combining all the above mentioned statements, investors find P2P Lending more profitable when compared to other investment classes, and choose to build their portfolio with ownerstown
OwnersTown – Your New Investment Platform
A leading investment platform, OwnersTown offers investors a new avenue for investment and financing. All your investment aspects can be managed and monitored online on the app, from registration to investment and repayment. Our website provides an easy user experience in terms of transactions, download, and analyses detailed account statements, and many more features. Investing with OwnersTown is made extremely simple for all our investors.
As soon as an Investor joins our platform, they are assigned a dedicated Relationship Manager who will cater to all their investment related needs. They are provided with an All-in-one dashboard where they can view the complete and live status of your investments and repayments.
For any further clarifications and help you can reach out to us at your convenience. Our team is always ready to help and make your investment journey smooth. You can also visit our website or download our app to check out various other investment opportunities.