Peer-to-peer loans are non-traditional loans that you can get directly from an individual lender. You can opt for peer-to-peer lending platforms when in need of financial aid as they offer various types of loans such as personal loans, business loans and medical loans.
Moreover, P2P loans offer attractive interest rates and flexible repayment terms that you can take advantage of. Peer loans are the best option if you need funds urgently, especially when traditional banks and NBFCs are not immediately accessible.
Is P2P Loans Beneficial For Borrowers?
Yes, P2P loans are beneficial to borrowers. They have become a great alternative to conventional borrowing, especially if you are seeking swift and efficient funds. These loans offer several advantages that borrowers can benefit from, these are:
Accessibility: peer-to-peer lending platforms provide quick access to funds for borrowers, making loans more accessible, even to those with limited credit history.
Quick approval: the processing of loan applications for peer loans is much faster than that of traditional loans. Borrowers can receive the necessary funds at a much shorter time frame, helping them meet their urgent requirements.
Competitive rate: P2P loans offer competitive rates that are sometimes lower than what is offered by banks. However, the rate will depend on your creditworthiness.
Diverse loan amounts: peer-to-peer loan lenders offer a wide range of loan amounts that cater to different financial needs. They will fund a small P2P personal loan amount or a large peer-to-peer business loan amount depending on your creditworthiness.
Flexible terms: borrowers have the flexibility to negotiate better terms with individual lenders. Thereby, leading to more personalised repayment plans and loan terms.
Diverse borrower profiles: P2P lenders offer loans to a wide range of borrowers, helping those with low credit or no credit history get the financial aid they need.
No collateral required: most P2P loans are unsecured, which means that borrowers will not need to provide collateral or any valuable asset to get the loan.
Eligibility For Peer-to-Peer Loans
The eligibility criteria for peer-to-peer loans are critical as they determine your creditworthiness. The certain eligibility criteria that you need to meet for P2P loans are:
Must be a citizen of India.
Must be at least 18 years of age.
Must be salaried or self-employed.
Must have a credit score of 600 or above.
Must have a debt-to-income ratio of below 40%.
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Check Your Credit Score for Free Also get a Free Credit ReportPeer-to-Peer Loan Interest Rates & Charges
The interest rates and fees for peer-to-peer loans will vary on a number of factors such as the lending platform, your creditworthiness, lender’s preferences and more. Here is a general overview of the different rates and fees:
| Interest Rate | 9.99% - 30.00% p.a. |
| Processing Fees | Starting from 1% onwards |
| Late Payment Fees | Up to 18% or ₹500 |
*Note: The interest rates are dynamic and subject to change based on your credit history and credit worthiness.
Documents Required For P2P Loans
There are certain documents that you must submit as part of the application process. These documents provide the lender with proof of your identity, repayment capability, and more. Here are the documents required for peer loans:
| Identity Proof | PAN Card, Aadhaar Card, Voter ID, or Passport. |
| Age of the borrower | 21 - 60 years old |
| Date of Birth Proof | PAN Card or Passport |
| Signature Proof | PAN Card or Passport |
| Address Proof | Rental Agreement, Utility Bills, Voter ID, or Electricity Bill for the last 3 Months |
| Income Proof for Salaried | 6 months bank statement and 3 months salary slip |
| Income Proof for Self-Employed | 2 years business ITR |
P2P Loan EMI Calculator
Peer-to-peer loan EMI calculator is a valuable tool that you can use to determine your monthly repayment amount. It provides a clear and structured way for you to understand the financial implications of a loan. You can use an online EMI Calculator to check your loan EMI by inputting the necessary information, such as the loan amount, interest rate and tenure.
₹
%
| Monthly EMI | ₹86 |
| Principal Amount | ₹1,000 |
| Total Interest | ₹32 |
| Total Amount | ₹1,032.00 |
| Year | Month | Principal (A) | Interest (B) | EMI (A+B) | Balance | Loan Paid to Date (%) |
|---|
You can also manually calculate the standard EMI amount using the formula:
EMI = [P x R x (1+R)^N] / [(1+R)^N - 1]
where P is the principal amount, R is the interest rate, N is the tenure.
Peer-to-Peer Loan Lenders
Peer-to-peer lending has become popular in recent times, leading to the emergence of many peer-to-peer loan lenders and lending platforms. Here are some of the few platforms that are available in India along with their interest rate:
| Lender | Interest Rates |
|---|---|
| Faircent | 12.00% - 28.00% p.a. |
| LenDenClub | 6.5% - 20.95% p.a. |
| Finzy | 10.99% - 27.99% p.a. |
| Lendbox | 11.49% - 36.00% p.a. |
| Liquiloans | 11.00% p.a. onwards |
*Note: The interest rates are dynamic and subject to change based on your credit history and credit worthiness.
Steps to Apply For P2P Loan
Applying for a peer-to-peer loan is easy and convenient. All you need to do is follow these few simple steps below:
Step 1: Visit any online peer-to-peer lending platforms.
Step 2: Create an account and provide the required personal details.
Step 3: Provide the required documents.
Step 4: Once verified, you will receive loan offers from multiple lenders.
Step 5: Select the right lender for you and choose the repayment schedule.
Step 6: Sign the loan agreement
Step 7: Your loan amount will be disbursed to your registered bank account.
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Peer-to-Peer Loan Risk and Challenges
Peer-to-peer loans are a dynamic alternative to traditional lending helping lenders get higher returns and borrowers get easy access to funds. Although it is convenient, there are a few risks and challenges that you must be aware of. Below are the risks and challenges involved along with the strategies to avoid default and fraud:
Credit risk: there is a risk for borrowers to default on a loan causing financial loss to lenders. To mitigate this risk, lenders need to conduct thorough credit checks.
Regulatory risks: regulations can change from time to time which can affect the P2P lending industry. You can tackle this by staying informed about the changes and ensuring compliance with legal requirements.
Lack of transparency: there can be limited access to detailed information which can lead to uncertainty. Conduct thorough research before using any P2P platform.
Market risk: economic downturns or market instability can affect the interest rate of a loan, which can affect the repayment of the loan. Make emergency funds available to tackle such a crisis.
Default risk: the lending platform may also face financial trouble or default so make sure to choose reputable and well-established peer-to-peer lending platforms.
Tips for Loan Repayment
Loan repayment can be a huge financial responsibility. Understanding the strategies and tips can help you better plan your repayment terms. Here are some of the tips on how you can strategize your loan repayment:
Create a budget: make a comprehensive budget that includes all your monthly expenses along with loan repayments. This will help you budget effectively and make timely payments.
Prioritise high-interest loans: if you have multiple loans, focus on repaying the high-interest ones first as it will help you save money in the long run.
Pay more than the minimum: try to pay more than the minimum required amount. This reduces the principal faster and saves on interest.
Avoid missed payments: if you miss a payment, it can negatively affect your credit score and will lead to a penalty. Set up a reminder or automate payments to avoid missing repayments.
Consider bi-weekly payments: try paying half the repayment on biweekly terms. This can help you make extra annual payments which can reduce the overall interest.
