Peer to peer lending is disrupting the lending space in India’s financial and banking industry. It is based on the concept of social lending in which a group of lenders fund a borrower. Peer to peer lending platforms are beneficial to both lenders as well as borrowers as they reduce intermediation cost compared to banks and pass on the benefits for both. These platforms are not rigid in their lending policy like banks and follow an innovative credit policy. Let us look at how peer to peer lending platforms evaluate credit worthiness of a borrower –

1.    Personal interaction – Unlike banks, these platforms believe in a philosophy that each applicant is different from other. What you can get from personally interacting with a customer cannot be achieved just by looking just at numbers alone. Peer to peer lending India platforms, apart from providing lending to a borrower, also acts as a problem solver for them. These interactions could occur over a phone or physically, but knowledge gathered from these interactions help these platforms in assessing credit worthiness of the borrower.
2.    Low CIBIL is not a problem anymore – If you ever have applied to a loan in any bank or financial institution then you must related to the most dreaded word for a borrower i.e CIBIL. It is 3 digit score that can make or break your application’s success at a bank. Most lending institutions would not lend to a customer having a CIBIL score below 700. But at Peer to peer lending platforms, a borrower is much more than a number. While a CIBIL number may tell you about applicant’s past repayment track record but it cannot tell you about what future hold for an applicant.
3.    Cutting edge technology – Most P2P lending platforms use modern technologies like Social modeling, Data analytics, Payment modeling etc to get deeper into the customer’s profile. These technologies are yet to be used at big financial institutions. Data generated through these technologies help these platforms to assess the true repayment capacity of the borrower.
4.    Detailed analysis – Peer to peer lending India platforms also perform detailed analysis of customer’s existing information like personal details, financial details, bank records, repayment record etc to present a clear and highly curates picture to the lenders. Different borrowers are provided a different risk rating and likewise a different ROI can be provided to different borrowers. A high risk borrower wouldn’t be ignored by a P2P lending platform but he might have to pay a slightly higher ROI for his loan but that would still be lower compared to bank’s ROI.
5.    No negative list – Most of the banks and financial institutions in the country have a negative list of borrowers and localities. Banks don’t lend to these individuals or individuals living in those places. But, at P2P lending platforms individual is just not some other record or a file to put aside. We believe that each individual is different and we have to treat each of them similarly.

As we can see from above article, that P2P lending platform analyze a borrower in a completely different manner compared to a bank. This new lending philosophy is gaining traction in very rapid way in Indian financial system and is expected to be answer to many of India’s financial problems in time to come.