Jan 17, 2019
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How p2p loan helps if you have a low credit score?

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Peer to peer lending platforms are soon catching the attention of youngsters because of the advantage of quick and easy disbursement and low-interest rate of p2p loans.

One can get the cheapest loans in India because it is easy to get small loans without worrying much about prepayment charges or high interest rates.

Banks are keener to lend to people with salary accounts who are working with A-grade companies. Most of the self-employed individuals find it hard to get a loan at an affordable rate. The main purpose of p2p lending is to pay heed to the first-time borrowers or those underserved customers who cannot get a loan otherwise.

P2p lending is recommended because the rate of rejection of loan is lesser, due to their various processes which differ from banks, specially in terms of documentation. The p2p platforms offer unsecured loans which are for the tenure of 3-36 months where the interest rates are from 12 to 28 per cent.

A mutual decision regarding the rate of interest is taken among the lender and borrower. The p2p platforms just act as a mediator between the two parties.

When the borrower applies for a loan, a physical verification is done by the p2p companies. For the salaried class, the p2p companies verify the financials and address through the bank statements and the pay slips; if the borrower is self-employed, these companies make an extra effort where they verify the location of the business, stock, inventories, etc.

Once the verification has been done and when there is a submission of PAN and address proof, one can get a loan starting from Rs 50,000 per lender and the amount can go up to Rs 10 lakh from the various lenders.

It was expressed by Amit More, Founder & CEO, Finzy at an article by India Times that they were looking at credit-worthy people, who would be assessed via Finzy’s credit algorithm. This assessment would go beyond the credit score. At times Finzy also picks borrowers which score high on multiple parameters even if they do not have a high credit score and at times, they can also be first-time borrowers.

The banks have a processing fee of 1-2 per cent for every new loan. They also have stringent policies for the pre-closure of unsecured loans where they charge 2-4 per cent for the pre-payment of a personal loan.

On the other hand, the p2p platforms have zero pre-payment charges and also flexibility in interest rates. They also have a 24 hours verification process for the borrowers where the loans are disbursed within 4-5 days.

One can literally get a loan with the click of a mouse where the documents and other essential formalities can often take less than 7 minutes.

Besides the competitive interest rates and paperless disbursal, the p2p companies also allow borrowers to take the loans for as less as three months, which makes it an interesting alternative.

The p2p platforms are definitely worth a shot because they are changing the face of lending and borrowing.

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