Peer to peer lending in India is an emerging concept on the investment circuit. It is natural that there are many misgivings about it in the minds of both personal loan lenders and borrowers. Let’s take a look at the prevailing myths about this form of investment and learn about the actual facts so that you can make a prudent decision.
Myth 1: Peer to peer lending in India is not legal
Fact: P2P lending is very much 100% legal investment in India for two reasons. First, the peer to peer lending companies in India (for example, LenDenClub) adhere to KYC guidelines by requiring documents such as PAN card, driving license, passport, Aadhar card, voter ID, salary slips and bank account number during registration. Second, RBI has proposed P2P lending regulations, which includes recognition to P2P lending platforms as Non-Banking Financial Companies (NBFCs) as well as the protection of the interest of borrowers and lenders.
Myth 2: The credibility of the borrowers is unreliable
Fact: The peer to peer lending companies in India undertake a due diligence to verify the profile of the borrowers. They verify borrowers’ personal, professional & financial details and credit history. In fact, most of them also do physical personal verification to ascertain the authenticity of the information provided by the borrowers. In case of any possibility of default possibility or low credibility, these P2P lending platforms reject to list the borrowers. Also, the complete profile of the borrowers is displayed on the platform for the lender to assess from their own investment perspective.
Myth 3: It is difficult to avail a loan through peer to peer lending
Fact: Borrowers can take instant personal loans for the purpose of home purchase & renovation, car purchase, vacation trip, medical expenses, family functions and any other purpose they deem necessary. The loan can be availed for any amount as minimum as Rs25,000. Unlike the banks, the registration process happens online in a few clicks & is very transparent, there are no hidden charges and the funding is very quick. Also, borrowers can reach out to multiple personal loan lenders.
Myth 4: Peer to peer lending is same as crowdsourcing
Fact: Actually, this is not true. While both are innovative forms of alternative investment and share the same core concept, their purpose and implementation differ from each other. In crowdfunding, several individuals came together to pool money to fund a project or an initiative. In peer to peer lending, the investors and borrowers come together to deal in short-term, unsecured loans. A borrower can borrow loans from multiple lenders, and in the same way, a lender can disburse loans to multiple borrowers. Peer to peer lending is an alternative to the banking model of financing.
As you can see, P2P lending is a very safe, convenient and alternate option for borrowers and lenders.