5 Things to Keep in Mind while Investing in P2P Lending Platform

5 Things to Keep in Mind while Investing in P2P Lending Platform

The P-2-P lending concept has brought about a spark of hope among the borrowers who have otherwise been denied by the banks for the funding. It has also brought forward an avenue for the tech savvy asset class wanting to invest for short periods of time. With the regulations been put up by the RBI for the peer to peer lending in India, the platform has become more lucrative for investment by the lenders.

5 Things to Keep in Mind while Investing in P2P Lending Platform

Check the lending platform

Check the lending platform before making any outright investments. Check out for the NBFC-P2P Certification from the RBI before registering on any platform. You may also compare the average lender performance on the individual platforms if you feel so. The average returns on 10% p.a.is considered a fair return. But the benefits from many popular platforms are as high as 18% to 22%.

Go for a diverse portfolio

Diversity in investments makes a good portfolio. The same holds true for the peer to peer loans as well. It is therefore recommended to furnish loans to borrowers across different categories, regions, income levels and purposes. This way, the portfolio gets more robust and diverse.

Balance between high and low risks

Investments with high risks give higher returns than the ones lower risks. But it is important to strike the correct balance between the two while investing in P2P loans in India. Investing in high risk avenues i.e. lending to high risk borrowers give high returns but also have higher defaults associated with them. You can also check out the various risk categories for ascertaining your returns. So, one has to balance between high and low risks while investing in the lending portfolio.

Borrowers’ Profile

Almost every P2P lending company in India categorizes the borrowers in categories like low risk, moderate risk and high risk. This categorization should be studied by the lender before making any investment decision. The returns on the investments will depend on the borrowers’ profile, the amount of loan and the tenure of the loan. Interest rates could vary between 12.5 percent to as high as 24 percent.

The lender should make sure of investing in a diversified portfolio across all the categories in order to maximize his returns while balancing the risks involved.

Reinvest your returns

The returns earned from the investments can be reinvested in other P2P loanson the same P2P platform itself. The method ensures more returns to the lender besides giving him the scope to diversify and invest in other categories. This will ensure a more robust and stronger performance for the lender.

Closing words

The P2P loans concept could be quite beneficial to the borrower besides being a good investment platform for the lender. However, the lender should make sure that the platform is a genuine one before registering in it. Moreover, the lender should also carry out hisown credit analysis and assessment and make his investments diligently.


Peer-to-Peer: Are P2P platforms safe for lending and borrowing?

Worried for the rejection of the loan application? Well, you really do not have to worry at all when the P2P loans are available. Peer to peer concept or the P2P platform for the lending and borrowing of funds is a new way for getting your financial needs fulfilled when your loan application is dismissed by the banks and many other financial organizations. The P2P finance concept is new to the country but is taking up the lending market in a big way.

P2P lending in India

The P2P platform is very similar to any other e- commerce platform that acts as a market place. The Peer -to – Peer platform can be taken as a market place for money lending activities. Online services are used to match the requirements of the borrowers that can be funded by the lenders registered on the platform. It is on the lenders as to whom and how much they would lend after studying the profiles of the borrowers. The rates of interest are also ascertained once the borrower expresses his requirements.

The platform is a boon to the borrowers in India who want a quick disbursal unlike that of the banks that take 4-7 days for the same. Moreover, people with rejected loan applications also have a chance to get the finance through the P-2-P lending companies in India.

Is it a safe platform for lending and borrowing?

The rules and restrictions for the transactions on the e-commerce sites are maintained by the RBI. Besides, the concerned P-2-P platforms also maintain some guidelines to be followed at their end. The borrowers interested in the peer to peer loans have to get registered at the site after providing the necessary documents for verification. The platform does its own assessments for the underwriting purpose and recommends an interest rate. The application is then listed for the registered lenders to assess and provide loan as per their choice and convenience. The listing remains open till the full funding is achieved or for a period of 70 days whichever is earlier.

Though the credit assessments for peer to peer lending in India is done mostly by the companies, RBI still holds a control on it. It has put a cap on the amount to be borrowed or lent on such platforms. The maximum that can be lent or borrowed by anyone on this platform is Rs.10 lakhs at any point of time. Also, lending to the same borrower is capped at Rs.50, 000 and the maturity at 36 months. More clarity on the regulations along with stringency is also expected from the RBI is near future.

The regulations put in by the RBI and the monitoring by RBI and the company on the transactions done on the platform complements the credit assessment of the applicants done by the companies at their end in order to provide a safer platform borrowers and lenders.

The P-2-P loans in India is thus on a rise with safer platforms and interested groups of lenders and borrowers.

News report forecasts rise of vehicle Finance by 2020

News report forecasts rise of vehicle Finance by 2020

The auto finance or the vehicle finance scopeseems to be promising for at least a decade. The near future for the sector is supposedly painted in bright colours. Many of the leading global panels of automotive finance and leasing experts have suggested good business for the said sector. The big leap of 4.5% in the opportunitiesand business done by finance companies in 2018 is expected to grow even further in the coming years assuring good returns even to the car finance companies. In simple words, Vehicle finance sector is expected to show constant rise and increase in near future which will commence by2020.

The vehicle Finance sector has achieved maturity

The auto finance market in India is one of the most developed ones in the Asian region. The sector has matured over time. The rise in the vehicle finance is good news for both the commercial vehicle loan market as well as the non commercial vehicle loan market including those that provide zero interest car loans in India. Researches indicate a good increase by 50% of the finance penetration though against a low base by 2020. The Non-Performing Asset (NPA) levels are however expected to be quite meager.

The demand in the vehicle industry is said to see the upsurge mostly due to the increase in the driving group. The population expecting to hit 1.4 billion in 2020 with a big chunk belonging to the driving age is the prime reason for the sudden rise in the demand for the vehicles creating demand for vehicles with alternate modes of financing to fulfill the gap. The strong demographic in the country followed by socioeconomic fundamentals and well-developed industry fundamentals such as credit infrastructure also boost the financing of vehicles.

The reasons behind the growth of vehicle financing

The glorified growth rate in the car finance market in India, both in the new car financing as well as the pre-owned car finance industry since 2012 is attributed to many factors. Few of these are

  • Therising urban population
  • Escalation of personal disposable incomes
  • Growing preferences towards car purchases

The other reasons that have contributed to the upsurge are the reduction in average ownership period of cars, higher penetration of banks and higher sales of the used cars in the country.

Working for a better tomorrow

The banks and NBFCs are also technology friendly by giving the option to their clients and customers to opt for the financing online these days. The act is also sure to contribute in increasing the car loan portfolio for these financial entities. Reducing holding periods and quality certifications of used cars are other driving forces for the market growth.

Though vehicle financing is bound to see an upward trend in the future, it is also advisable for the banks and the NBFCs involved in car financing to look out for the eligibility criteria of the masses properly before proceeding with the financing. Good business includes better returns and lesser NPAs.