India is a rapidly growing economy with an evolving finance sector. Traditionally, Banks were considered to be the best options for borrowers but with time we have seen evolution of lending industry with specialized NBFCs, micro finance lenders and alternative lenders. A recent development called peer to peer lending has entered the Indian market, which has the potential to disrupt the lending industry forever –
- Credit Appraisal– Banks underwrite in conventional way, laying significant emphasis on credit score, peer to peer lenders use sophisticated credit models and data driven approach to lending. P2P lenders also look into social and payment behavior of a borrower whereas, banks treat borrowers just as another number on credit report. If your number (score) is lower to what banks want then you would not get a loan. P2P lenders understand that each and every applicant is unique and you cannot decide just on the basis of one number.
- Loan approval timelines – A bank takes usually 3 weeks to sanction a loan. It needs to complete each and every step mentioned in its lending policy before it can provide final disbursal. P2P lenders have developed a cutting edge technology in which each and every step is technology driven. Peer to peer lending companies in India sanction your loan within week due to advantage of having a low size and mobility
- Customized solution – Banks have standardized lending products, whereas P2P lenders offer customized solution to borrowers based on their profile.
- Better Loan Terms –. Lending is transparent to both investor and borrower and better terms for interest, tenure, and loan amount can be negotiated by them to come to a win-win situation for each of them.
As we have seen from above points that how Peer to peer lending companies in India is a better deal from borrower’s point of view. With new guidelines for Peer to peer lending companies in India to come in next few months this sector will grow exponentially.