Updated on 4 Feb 2021.
In 2018, RBI approved licenses of 11 Peer to Peer (P2P) players to set a new landmark in the Indian financial market. Along with the adoption of new investment options like SIP, SWP over the traditional ones. Another trend has started in India that is taking a loan from Peer to Peer platforms than traditional banks.
These days, Peer to Peer lending in India is getting popular at a fast pace. More and more people are aware of p2p lending and prefer such platforms to take a loan over banks. The current size of the Indian P2P market is above Rs 200 crore, and it is projected to be $4-5 billion by 2023.
However, banks are still the leading players in India. This is primarily due to their strong foothold in the country which has existed for many decades while P2P lending has only been around for a couple of years.
What is Peer to Peer Lending?
Peer to peer lending allows an individual to borrow money from others without depending on the standard banking channels. As per RBI, it is a form of crowd-funding used to raise loans that are repaid by borrowers with interest. Fintech is the base of P2P lending. The online platform brings together peer lenders with borrowers in order to provide unsecured loans.
Best P2P Lending Platforms in India 2021
Lendbox is one of the leading p2p lending platforms in India. Located in New Delhi, Lendbox is RBI certified NBFC-P2P company with nearly 20,000 registered investors and 2,00,000 registered borrowers.
Faircent is a Gurgoan based P2P lending platform that started in 2013. It is one of the first P2P lending platforms to start operations in the country. It connects the borrowers and lenders directly, eliminating intermediaries to provide better rates for both.
Lendingkart is a fintech startup founded by Harshvardhan Lunia and Mukul Sachan in 2014. Lendingkart uses data analysis to connect borrowers with lenders based on their creditworthiness to provide loans.
The startup has secured ₹300 crores in debt funding in Aditya Birla Sun Life AMC in 2018.
Finzy is a Bengaluru-based P2P lending startup founded in 2016. It provides a digital platform to facilitate quick, easy and secure loans at personalized rates based on borrower’s capabilities.
The startup has also raised $1 million in funding in August 2018.
i2iFunding is a Noida-based fintech startup that provides a platform for borrowers to get loans at attractive rates, along with high returns for the lenders. The startup has last raised Rs. 5 crores in seed funding from SucSEED Venture Partners in 2018.
i-Lend provides an online marketplace connecting borrowers and lenders for loans. Borrowers get loans at around 18-24% rates, while lenders get better returns compared to a savings account and FD’s.
The startup was founded in 2012.
LenDenClub provides a technology-led platform for borrowers to connect directly with lenders, removing the intermediaries and cutting involved costs. The platform currently has more than 25,000 borrowers from over 7,500 lenders.
The startup last raised $500,000 from Venture Catalyst and Anirudh Damani, MD of Artha India Ventures.
PaisaDukan (BigWin Infotech)
PaisaDukan is providing a technology-led platform to facilitate smooth and seamless loans between borrowers and lenders. PaisaDukan is owned and operated by BigWin Infotech. They have raised $225,000 in seed funding in 2018.
RupeeCircle provides cheaper interest rates on loans compared to traditional financial institutions. The startup has raised Rs. 4 crores in seed funding from Mahindra Finance in 2018.
Monexo is a Mumbai-based P2P company started by M Sundar, Mukesh Bubna, and Sonal Bengani in 2014. This P2P lending platform raised $500,000 in seed funding in the year 2014.
Cashkumar is a Bengaluru-based fintech startup founded by Dhiren Makhija, Kannan Kandappan, and Yogesh Joshi in 2012. It uses various data points to check the creditworthiness of the borrower to facilitate a smooth loan process that ranges from 20,000 to 1 lakh and provides low-interest EMI’s to the borrower.
Bank vs P2P Lending
P2P lending is easing the life of people and is replacing bank loans for unsecured loans categories like personal loans, and credit line with instant paperless approval.
The biggest problem is understanding the real cost of acquiring a loan from a bank. Apart from the personal loan interest rate, you have to pay for loan processing charges, prepayment fees, repayment mode swap charges, file handling charges and some other hidden charges. The gap between the interest rate for depositors and the loan rate is quite huge, approximately 20-25%. In the end, the cost of taking this loan is much higher as a result of these hidden fees.
Whereas, P2P Lending platforms such as Rupaiya Exchange, Faircent, Lendbox now have the upper hand over traditional banking institute. There are no hidden fees. Many platforms such as Rupaiya Exchange do not even charge any prepayment fees. What they do is create a mutual relationship between individuals who require loans and lenders who want to lend their money for high returns. They create a win-win situation for both borrowers as well as lenders. For this, they charge a processing fee from borrowers.
How P2P lending is taking over Bank Loans
- Documentation Process: The documentation process that banks follow consumes a lot of time, sometimes more than a month whereas P2P lending is quick, easy and has simple processes. All you need to do is visit any p2p lending platform online, register yourself and upload the necessary documents for verification such as address proof, pan card number, and ITR. You do not go physically as the complete process is online and hassle-free. The faster you provide your personal data for verification, the faster your loan becomes live. Your loan can get easily funded within a span period of 2-20 days.
- Credit Score: One major factor which is considered by most banks before funding your loan is your credit score. If an individual has credit score less than 700 then his/her case would be a doubtful case for banks and chances of loan approval would be low while P2P lending platforms facilitate p2p loans even if you have a bad credit score because they consider other factors like online presence, social behaviour, financial history, etc.
- Low Cost: While there is a high cost associated with most credit options in the market, P2P platforms offer low cost credit options. This is due to the low operating costs of most P2P platforms. Most platforms only charge a processing fee to enable all transactions while traditional options require higher fees.
These factors make Peer to Peer lending very exciting and more accessible to the public. India is a country of 1.25 billion citizens and we must have the right infrastructure to provide them with the support they require. Finances are required by all and providing a platform where it is next to impossible to get a loan isn’t going to help them. We need an efficient, transparent and secure platform. This is what P2P Lending strives to achieve in India.
Understanding the benefits of new processes and systems is very important to make our lives easier. Just make sure you always research and make a decision after studying the pros and cons of all your options be it a bank, an NBFC, or a Peer to peer platform. Always know where and how your money is flowing so you do not end up in unfavorable situations.
But with faster execution and instant approval P2P is having a great future ahead with more penetration into the sub-urban areas of India that are solely depending upon banks or NBFC institutions.
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