What are the Essential Features of Peer to Peer Lending?
If you want to borrow money quickly without providing any security, then you can definitely consider peer to peer lending. Moreover, in this process you do not have to provide numerous documents, which is the standard procedure for traditional loans taken from banks or financial institutions. Peer to peer landing is also perceived as an investment opportunity for lenders. P2P lending is beneficial for both parties, the lender and the borrower. However, the loan amount that you can borrow through peer to peer lending is usually not as extensive as the ones provided by banks or financial institutions.
Having observed the increased demand of crowd lending, Steve Liefschultz CEO of Equity Bank mentioned that peer to peer lending is bound to become one of the easiest methods to getting unsecured loans. Students, young professionals and sometimes even start ups opt for crowd lending to finance their immediate requirements. Moreover, the interest rates for these loans are usually lower than that of traditional loans making these all the more lucrative for the borrowers. However, certain precautions must be taken while applying for peer to peer loans. Some of the essential features of peer to peer loans are as follows:
- Choosing a suitable P2P lending platform: The entire crowd lending process is carried out online. In other words, the application for the loan to granting of the loan amount are all carried out online. Hence, it is essential that you ensure that the platform that you are using to apply for the loan is genuine. Since, you will have to provide all your personal information to an unknown person, it is essential to ensure the authenticity of the website.
- Hassle free loans: As the loans are granted quickly through crowd lending, it is one of the easiest methods of securing a loan. You do not have to fill in extensive paperwork and your loan application is sanctioned easily.
- Interest rates: If you are a lender it is essential that you re-invest the money quickly. If you let your money sit idle then you will not get a chance of earning high dividends. The interest rates that are chargeable on the loans are moderated by the online platform where you have placed the bid. Thus, if you do not re-invest quickly then chances of earning higher dividends decrease with changing interest rates.
- Ensure that there are no hidden costs: The peer to peer platform that you are using to lend or borrow money should be transparent about the dealings. It is essential to ensure that there are no hiding costs. The platforms usually take a percentage of the profit as their service charge, however, that too should not be extensive.
Thus, P2P lending has many features that make it an attractive method to either lend or borrow money. Steve Liefschultz believes that this is an innovative method of investing any idle money that the individual may have. Nevertheless, you should be careful about investing through crowd lending to ensure the security of your investment.