People without a credit score or low credit score get refused by banking institutes. P2P lending platforms benefit especially those individuals.
Peer-to-peer (P2P) lending platforms have emerged in recent times as a reliable alternative financing option. People without a credit score or low credit score get refused by banking institutes. P2P lending platforms benefit especially those individuals.
Raghavendra Pratap Singh, Co-Founder, i2iFunding, says, “It has mostly become popular among people who are looking to get unsecured loans quickly at attractive interest rates. However, people should be aware while taking a loan from a P2P lending platform.”
Eligibility Criteria: Before applying for a loan, you should read about the eligibility criteria of that platform, their coverage locations, the maximum amount which they provide and profession type for which they give a loan. Though the RBI limit for a loan to a single person is Rs 10 lakh, however, many platforms have their own upper limit.
Time taken to disburse money: Most of these platforms claim to have a turnaround time of 2-3 days, while many platforms do not have enough number of lenders. On some of these platforms, it is quite possible that you may not get loan amount even after waiting for 15-20 days.
Applicable interest and fees: It is an important factor to check its processing fee, registration fee if any and the EMI amount which you will have to pay. Account for all the fees which you will have to pay from registration to final disbursal and then calculate the effective rate, which you will be paying.
Penalty and Pre-Closure Charges: It is important to read the loan agreement carefully and learn about the penalty, which one may have to pay in case of delay in repayment and other charges in case of bounce, change in the bank etc. Adds Singh, “Most of these platforms do not charge anything for pre-closure, but you should still check if there are any.”
Whether P2P Platform is registered as NBFC-P2P with RBI or Not: All RBI-registered NBFC-P2P lending platforms are required to adhere to the RBI guidelines, in terms of privacy, security and disclosure of information, collection etc. They also need to inform about loan repayments to all credit bureaus like CIBIL, Experian etc. So, if you are paying EMIs on time, your CIBIL score will improve only if you have taken a loan form an RBI-registered NBFC-P2P.