P2P Lending how it works?

  • Peer-to-Peer lending

    The peer-to-peer lending platform basically enables transactions between two individuals without any involvement of financial bodies, third parties. This P2P lending platform connects the borrowers directly to the investors. This platform developing company sets norms and terms and enables transactions.

    Here is the step by step procedure on how it works.

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    1. Initially, the investor has to register in the P2P lending platform. Once the registration is successful, a list of borrowers with norms appears. Then investors can browse borrowers and offer them their loans, depending on their investment amount, tenure and other norms.

    2. It is totally up to the investors who can decide the investment amount and the interest rate at which they would like to afford a borrower.

    3. So all these processes are done within the lending platforms directly. In some cases, the lending platform offers the borrower by choosing the lowest interest rate offered by the participating investors.

    4. Similarly, like investors, borrowers can browse the investor list and send requests to offer their loan. The investors can view all this information on their page.

    5. Investors can make an offer if and only the borrower is active. Once the borrower accepts the loan amount during the active period, then there are no further listing offers!

    6. The peer-to-peer lending platform company collects all the necessary documents from the borrower and executes the required agreements. P2P lending platform then collects loan amounts from the investors and deposits in the borrower account.

    7. Once everything is done, the investor gains profits from the interest paid by the borrower and also the lending platform company earns a little amount of profit!

    I hope this was informative for people who don't have any idea about how peer-to-peer lending works.