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Do you know why people invest? The main purpose of investment is to outpace the annual inflation and increase the value of money. In other words, people invest to increase their wealth. The current annual inflation looms around 7%. So in order to increase wealth, you need to invest in options that provide returns higher than the rate of inflation. But, traditional investments like FDs and PPF do not provide enough interest income to beat the annual inflation. At the same time, investments like equity carry a high market risk and the returns are not guaranteed. Having said that, peer-to-peer lending provides a perfect alternative for such traditional investments and provides higher returns in the form of monthly repayments. Sounds interesting, right!
This article helps you understand P2P lending in more detail and also lists the best P2P lending platforms available in India.
What Is Peer-to-Peer (P2P) Lending?
Peer-to-peer lending, also known as crowdlending, is a type of investment option that allows the investors to lend directly to the borrowers, eliminating the need for middlemen. Even though P2P lending sounds much like other fixed-income generating investments, it provides much better returns and that too at very low risk.
Moreover, the wide reach of Peer-to-peer lending companies in India provides a great opportunity for the investors to earn returns higher than traditional investment options like FDs and PPF.
Understanding Peer-to-Peer Lending
As mentioned above, peer-to-peer lending is a new-age investment option. The online presence of top peer-to-peer lending companies in India has made it possible for investors to choose borrowers according to their needs and requirements.
First of all, the investors open an account with the online platform of the peer-to-peer lending companies and deposit the amount that they want to invest. P2P companies like LenDenClub use AI technology to invest in the best loans to optimise your portfolio.
These P2P companies in India not only allow you to find suitable borrowers but also handle money transfers and money repayments while ensuring top-notch security of sensitive information.
What are the Typical Functions of P2P Lending Platforms?
While you might think that the only role of P2P lending sites is to help investors find suitable borrowers, it is not true. The role of P2P lending platforms is much more diverse than that. Let us have a look at some of the typical functions of these platforms –
- Onboard Investors and Borrowers
P2P lending companies reach out to investors and borrowers, encouraging them to register on the platform. The investors have to sign up on the platform to avail themselves of the services. Not only this, but these platforms also help source creditworthy borrowers whose loans are invested in.
In order to keep the default risk very low, P2P companies thoroughly check the background of the borrowers. They check the income level of the borrowers and if they will be able to repay the loans. Additionally, the credit history of the borrowers is also checked thoroughly before getting them onboard the platform.
LenDenClub, one of the top peer-to-peer lending companies, conducts borrower screening across 200+ data points to ensure a default risk of less than 4%.
- Facilitate Money Transfers and Ensure Security
In addition to onboarding individuals and institutions, P2P lending companies also help keep the money safe in an ESCROW account and facilitate money transfers. As per the RBI regulations, every P2P marketplace is required to maintain an ESCROW account and route all the transactions through it to ensure the privacy of confidential information.
- Help investors get loan repayments.
Following up with the borrowers and keeping track of every borrower individually can be a tedious and time-consuming job. Peer-to-Peer lending sites help the investors to eliminate this need and facilitate loan repayments.
What are the Advantages of lending in the P2P marketplace?
The interest on traditional investment options like FD and PPF is 4-5%, which is not enough to beat the increase in the cost of living (inflation), which is 7%. Having said that, the increase in the number of people looking for alternative investment options is quite justified.
Let us look at some of the reasons why P2P lending can be the best alternative investment option for you –
P2P lending provides returns of up to 12% as opposed to 4-5% in traditional investment options like FDs. P2P lending can help investors create a great source of passive income. All you need is a little bit of risk tolerance and some money to invest.
Some of the top P2P lending platforms conduct a thorough screening of the borrowers to ensure a very low default risk. This provides the investors with greater security and reduces the overall risk of investment.
Unlike traditional investment options like Real Estate, you can start investing with small amounts in P2P lending.
- Portfolio Diversification
In addition to the low default risk, P2P lending platforms also allow the investors to diversify their lending portfolio by lending to multiple borrowers at the same time.
- Flexibility to Choose Risk
P2P lending platforms allow lenders to choose the amount of risk they want to undertake. Investors have the flexibility to select borrowers based on their ratings.
5 Best P2P Lending Platforms in India
Before you take your next step and select the best online lending platform, let us first have a look at the list of top peer-to-peer lending companies in India.
- LenDenClub – It was founded in 2015 by Bhavin Patel and Dipesh Karki and is headquartered in Mumbai.
- Faircent – It was founded in 2013 by Rajat Gandhi, Nitin Gupta and Vinay Mathews. It is based in Gurugram.
- RupeeCircle – RupeeCircle was founded in 2017 by Ajith Kumar, Ashish Mehta, Abhishek Gandhi and Piyush Saurabh. It is a fintech startup based in Mumbai.
- Money Club – Headquartered in Noida, this online platform was founded in the year 2016 by Manuraj Jain and Surajit Ray.
- i-Lend – Founded by Mukesh Kothari, Niti Gupta and Shankar VVSSB in 2012, this is a Hyderabad-based P2P-NBFC platform.
LenDenClub – Best P2P Lending Platform in India
Sure, there are a lot of P2P lending platforms that help bring investors and borrowers together to provide better returns on investment; LenDenClub is the one of the best and largest P2P lending platforms in India.
Here are the reasons why –
- It is trusted by more than 2 million people.
- Provides AI-powered Auto investment options.
- With auto-investment, your investment gets diversified through AI and ML across multiple borrowers, which in turn reduces your risk significantly.
- Borrower profiles are screened by leveraging 200+ data points which helps ensure a low risk of default.
- Provides estimated returns upto 12% p.a.
- The returns provided are free from any market risk.
- Uses ESCROW mechanism to keep the transactions safe and secure.
Now that you know why LenDenClub is the best online P2P platform available in India, don’t wait any further. Take the right decision and Register now with LenDenClub!
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