Peer to peer (P2P) lending in the recent few years has emerged as a reliable alternative money lending and borrowing option. This is especially for people who are looking to get unsecured loans quickly at attractive interest rates. However, as this sector is unexplored, experts suggest borrowers should keep certain points in mind while taking a loan from a P2P lending platform.
Here is a list of things to keep in mind while borrowing from a P2P lender;
Eligibility Criteria: Know the eligibility criteria before applying for a loan. This way you will not be rejected for the loan. Read about the eligibility criteria of that platform, the maximum amount which they provide, their coverage locations, profession type, etc. based on which they approve the loan. Also find out the loan amount that they approve, even though RBI’s limit for a loan to a single person is Rs 10 lakhs, many platforms have their own upper limit.
Interest and fees: Know about the applicable interest and fees. It is an important factor to check the processing fee, registration fee, along with the EMI amount which the borrower will have to pay. Account for all the fees that you might have to pay and then calculate the effective rate, which you will be paying as it shouldn’t come as a surprise later.
Charges: Know about the Penalty and Pre-Closure Charges. Hence, it is important to read the loan agreement carefully and know about a penalty, which borrowers may have to pay. This can be in case of delay in repayment and other charges such as bounce, change in the bank, etc. Even though most of the P2P platforms do not charge anything for pre-closure, it is still better to check if there are any.
Time to disburse money: Even though many platforms claim to have a turn around time (TAT) of 2 to 3 days, that may not be correct. Some of these platforms take a long time to disburse the loan. It is quite possible that on these platforms, you may not get the loan amount even after waiting for 15-20 days.
Registration: Find out whether the P2P platform is registered as NBFC-P2P with RBI or not. All NBFC-P2P lending platforms need to be RBI registered and are required to follow RBI guidelines, in terms of security, privacy, disclosure of information, collection, etc. Credit bureaus like CIBIL, Experian, etc. also need to be informed by these platforms about loan repayments. So, if the borrower is paying EMIs on time, his/her CIBIL score will improve. But this only happens if you have taken loan a from RBI registered NBFC-P2P.
