Last week, governor of Reserve Bank of India, Shaktikanta Das, in his keynote address at the NITI Aayog’s Fintech Conclave said peer-to-peer (P2P) lending has the potential to improve access to finance for small and medium enterprises. As of now, 11 entities have been licensed to operate on P2P platform. On a P2P platform, individuals can connect and lend as well as borrow. Unlike a bank where you have a financial institution lending money, here the lender can either be an individual like you or a financial institution. Faircent, i2ifunding and Peerlend are P2P companies, having a non-banking finance company licence.

How does it work? You can lend or borrow from the platform only if you are a resident of India. You will have to first register on the platform with details such as name, contact details, date of birth, gender, address, loan amount, purpose of the loan, employment details, income and PAN. Once you are verified, you can start using the platform. If you want to borrow money, you can either opt for a personal loan or a business loan. The interest rate on the loan can range from 8.95% to 30% and the loan amount can be between ₹30,000 and ₹5 lakh. Usually people take loan for business, family event, application purchase and home improvement.

What should you do? It is not advisable to take a loan for expenses. However, if you still need to take a loan it would be advisable to compare rates. Remember that you have to pay a processing fee which can range from 3-5.5% of the loan amount, excluding taxes. Hence, factor in the charges. Considering it is an NBFC, your repayment behaviour will be captured in your credit report. You need to repay on time to ensure that your credit score is not affected. If you plan to lend on the platform, you should do your due diligence. A high-risk customer may give you higher returns, but the chances of getting the capital and the interest back could be low.

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