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Skeptics argue that in P2P lending, you’re putting your money at risk, lending it to total strangers in the hopes of generating income. They also say your financial and other sensitive information becomes vulnerable. This isn’t entirely accurate. It’s natural that you will want to make sure your p2p lending platform has taken sufficient measures to protect your personal data from hackers. When stepping into P2P Lending, you should look for a trustable platform. Let’s go through the security measures in P2P Lending that can make it safer.
Security measure to make P2P Lending safer
Background checks
Before you decide to lend your hard-earned money you should run a background check on the borrower. Bank statements, salary slips, ITR are stored digitally on P2P platforms. Online transaction data, mobile and social data should be carefully evaluated and studied to understand the borrower’s ability, stability, banking habits and intention to repay the loan. A credit score uses these data points to form a statistical number that evaluates a consumer’s creditworthiness and is based on credit history. You can use credit scores to evaluate the probability that the borrower will repay his or her debts.
This is similar to any other kind of investment – where you do your research before investing your money.
Diversification
As with any kind of investment, diversification reduces risk. Even more so in P2P Lending. A highly diversified portfolio will less volatile (and generate more stable returns) than a concentrated portfolio. That’s why it’s generally considered wise for you to properly diversify your investments to make P2P Lending safe .
- Lend to both companies and individuals: Diversify across personal loans for individuals and business loans, so that you’re not too exposed to just one or the other.
- Lend to a wide range of borrowers: You might benefit by making sure you’re mixing your P2P loans across a wide range of borrowers. This will ensure that your portfolio is not too heavily exposed to any one lending segment. For example, too much exposure to loans borrowed by property developers might harm your portfolio when India’s property market next turns down.
- Lend at various interest rates: Risker loans typically attract higher interest rates. By lending only at the higher interest rates, you increase your risk. Try to blend by lending loans across a wide range of interest rates. This will ensure that your P2P portfolio has a sensible balance of low-risk and high-risk borrowers.
- Lend across varying time periods: Try to lend for varying durations. By investing right across varying timescales, you can reduce the risk of your P2P lending investments getting concentrated over just one period of time. Varying your investments across different timescales will also improve your liquidity.
Collection & recovery services
Let’s try to understand collection & recovery services from an i2i perspective.
- The platform you are using for P2P lending should facilitate the signing of a legally binding agreement between you and the borrower. i2i Funding mandatorily enforces such agreements.
- I2i also collects and holds borrowers’ post-dated cheques. This is useful just in case of the borrower delays payments. These records can act as proof in case of criminal legal proceedings.
- Loans at i2i are disbursed only after the borrower signs the legally-bound loan agreement. Moreover, the loan is disbursed from your escrow account to the borrower’s bank account.
- After the loan is disbursed, you will receive EMIs every month. If a borrower fails to pay an EMI within a stipulated time, a penalty should be levied on the borrower which is payable to you.
- Every month the entire EMI amount is collected directly (through auto-debit) from the borrower’s account to your Escrow account, from where it gets reflected in your virtual account.
Read more – How p2p Lending Works?
The Ideal P2P Lending Platform
An ideal P2P Lending platform, therefore, is one that meets all these criteria, and more. i2iFunding offers all these important checks, and thus we ensure that your investments are safe and you earn higher returns with low risk. Speak with our investment advisor today to understand about p2p lending investments.
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