With the increase in trend of buying and selling everything online, lending money online has also become one of the popular trends these days. Gone are the days when people follow tedious bank procedures to borrow a loan but with Peer to peer lending, borrowing has become simpler.
Today in the global financial landscape, many portals have started online lending and borrowing which is gaining a lot of popularity among loan borrowers especially in India. This type of lending is also known as social lending or crowdlending. It enables individuals to borrow and lend money without any financial institution as an intermediary and also extends credit to borrowers who are unable to get it through traditional financial institutions.
Getting loan especially through financial institutions is a very tedious and long drawn procedure which sometimes leaves a borrower into a depressing state. But with online lending, a person even with a low credit score or less salary can easily avail any type of loan at their agreed interest rate.
As P2P lending scenario is yet to take a strong foothold in India, people are still not aware of its advantages. So here is a list of benefits that make lending from online platforms better than any other method of lending.
Easy and fast documentation
P2P lending is completely an online platform, so as compared to manual applications; one can avoid the cumbersome process of document filing. Here a loan can be approved in just 72 hours. All you need is to upload important documents like salary slip, identification documents, and bank statements digitally. At the same time, one can also interact with the lenders so that a mutual agreement can be made on the rate of interest.
Lesser eligibility criteria
While taking a loan from any nationalized bank or financial institutions, one has to cross the hurdles of various eligibility criteria before landing on the final step of loan approval. These criteria include good credit score, decent salary bracket as well as strong financial background. But with online lending, one can get a loan even with low credit score, less salary bracket or poor financial backing.
Moreover, in case of first-time buyers, instead of credit score, social verification is used. One can connect with their social media profiles on the lending platform. The lending platform will use your social network and other personal, occupational and financial information to measure your credibility. Thus, you can easily be eligible for getting a loan from an online lending platform.
No hidden charges
When taking loan from banks, one has to pay some hidden fees and charges that people are not aware in the beginning.
But with online lending, this is not the case. There are no hidden charges or fees. The platform clearly states the registration fee on the loan at the beginning of your registration. So a borrower doesn’t have to pay any kind of hidden charge and they can use full loan amount as per their requirement.
No penalty on pre-paying loan amount
While pre-paying a loan taken from financial institutions, a borrower has to pay a pre-closure penalty. Banks mostly ask to pay a hefty fine if someone closes the loan account before the maturity period.
On the other hand in P2P lending, you can easily get rid of the loan without getting penalized. Most of the online lending platforms charge only nominal prepayment penalty.
Low rate of interest
While applying for a loan, if your credit score is low, then a borrower has to compromise on the interest rate. Sometimes they have to pay huge rate of interest on the principle amount.
But in case of peer to peer lending, borrowers often get competitive interest rates. There are many lenders who bid with different interest rates to provide loan. So the lender who gives you lowest rate of interest, you can opt for a loan from the same.
So with lots of advantages, online lending is becoming a much sought-after lending platform among many borrowers in recent times.