Advantages of peer-to-peer lending for the easy loan procedure
The peer-to-peer lending platform brings together investors or lenders, issuers and borrowers on the digital platform. These platforms help lenders provide loans to individuals who need cash at an interest rate. The provision of the loans is available between small or medium-sized enterprises and individuals or businesses. Peer-to-peer lending is direct money lending to firms or individuals who want to avoid financial institutions acting as intermediaries in such deals. These landings provide secured loans; that is why peer-to-peer lending, or P2P lending, has gained popularity in the last few years.
- The legal framework of P2P lending
The regulations of P2P lending come under the central bank of a state and are subject to master recommendations, which are not banking in particular. These recommendations that came into vogue in 2017 are constantly updated to ensure that the lending processes are relevant. If you go by the master recommendation, you will see that no banking agencies are registered as companies that put up non-banking financial agencies under these platforms. It intends to carry businesses of P2P lending to apply for COR or a certificate of registration from the National Bank.
- Significant regulatory considerations
Peer-to-peer learning is subject to a few regulatory mechanisms of the national government. Hence, these are listed below:
- Cap on the lending limit
- Cap on borrowing limit
- Participant grievance redressal
- Submission of information by the company
P2P platforms have the following responsibilities towards borrowers and contributors.
The master recommendation explicitly provides for duties the P2P platforms must adhere toward their borrowers and investors. The lenders must have details associated with the borrower, including the personal identity interest rate, required amount, credit rating score, etc. Additionally, every other party regarding the conditions and terms of the loan, including returns and taxes, must be disclosed to the lender.
The directions do not restrict the borrowing fund as business loans do. The threshold for the loan the borrower gets or provided by the lender across these platforms is devoid of such directions. The borrowers have details of the lender, and the lender also has a level of trust that helps the business go smoothly. Thus, the peer to peer lending process does not become as complicated as it is with other financial institutions.
- P2P learning provides a convenient and fast application method
P2P platforms are available online, making the application process convenient, fast, and handy. Along with this, most P2P platforms have a list of websites ready to help the borrowers with necessary information. Hence, getting money through these platforms is quick.
- Access low-interest rate
Borrowers may get access to a loan with an interest rate lower than the traditional financial institutions. It’s because investors furnish money directly to these individuals through the platform, and thereby there is no role of an intermediary in these processes.
Hence, if you do not want to get into any issues with traditional financial institutions, you may go for P2P lending. It would be best if you got into it after adequate research.