Peer to peer lending often abbreviated as P2P lending as well, is the practice of lending money to individuals through online services. Borrowers are matched with lenders through lending companies but all services are provided on an online platform. These platforms offer both secured and unsecured type of loans, In the secured type they keep some property or valuable asset of the borrower as collateral and in unsecured loan they offer the loan to the borrower without taking any kind of security from him, but charge a higher rate of interest instead.
Peer to peer lending platforms usually offer giant interest rates ranging anywhere between 16% and 24%. And many Peer to peer lending sites in India accept investments as low as 10,000 rupees.
The tenure period in these investment platforms usually from 6-60 months and thus are definitely short term investments. Each lender has the flexibility to choose borrowers, according to his/her investment tenor.
Peer to peer lending is not currently regularized, but the Reserve Bank of India has put a consultation paper to regulate it and the final guidelines are expected soon.
Peer to peer lending also offers an option to the low cibil score borrowers to attain loans. The only catch here would be that the interest rates will be higher as compared to a borrower with a high cibil score. As already mentioned, the loans could be of two types, namely secured and unsecured. The lenders and Peer to peer lending platforms prefer secured loan because they could get hold of the property in case the low cibil score borrower defaults to make the payment.