It is not yet end of the month, and you are running out of money in your bank account, or, you had not foreseen and budgeted for a big spend, maybe on some medical treatment or a vehicle repair that you have to incur suddenly. Maybe the TV or the washing machine, that you have been eyeing is on sale for a limited time, and it is a steal at current levels. Which is why you do not want to let go of the short sale window. It could be that there is a big dent in your savings due unforeseen home renovation costs, and you need a small sum of money to tide the time over, and you need it now. This situation may be familiar to many a folks. One of the new age options available to the netizens, that was not there before, is the option to borrow online from peers, hence the name Peer-to- Peer Lending. For the lenders, P2P lending is a good alternative investment option as compared to a stock market or mutual fund or fixed deposit.
Here are the three reasons why you should try P2P lending:-
1. Improve Your Credit Score
Are you new to lending? In which case, you would need a three digit credit score that ranges from lower 300 to higher 900 range, for the lender to assess your creditworthiness. The good news is that you don’t have to pay to obtain your first credit report. These credit score and reports can be obtained for free in electronic form from the four Indian credit bureaus of CIBIL, Experian, Equifax and CRIF. This effectively means that one can get 4 free credit reports each year.
Now that you got your first few credit reports for free, you may want to improve your credit score, in order to get better rates of interest from various lenders. There are a number of ways one can improve their credit scores. One of the good ways to initiate a credit score is by taking a loan. One can then build up a good credit score by ensuring timely and full repayment of the loan. One can also build up a good credit score by paying up credit card balances and utility bills like water, electricity, data bills on time.
2. Faster Loan Disbursement
Compared to the banks and NBFCs, the loan gets approved in relatively shorter period of time using latest technology like AI and Machine Learning, and algorithms.
3. Attractive Rates of Interest
In case of P2P lending, the rates of interest are generally determined using the risk profile of the borrower. If the individual is perceived as low risk based on their high credit scores, good loan payment history and complete financial information, then they are accordingly charged a low rate of interest. However, a high risk borrower would have to pay a high rate of interest on a P2P platform as the risk premium is higher in their case. Since the Fintech companies/ P2P lending companies are leaner and nimbler than the bank most of the time, majority of the borrowers get loans at a better rate of interest than a bank.
This time around definitely do consider taking loan on a P2P lending platform as an option. Not only will you build your credit score, obtain loan disbursement quickly but get the loan on attractive rates of interest.
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About the Author
Kanchan Dwivedi is the founder of LoanGini, a P2P Lending Platform in early stages. The vision of LoanGini is to enhance the reach of financial services to the unserved and the underserved. LoanGini is excited to a be selected amongst Top 40 amongst 2000 applicants for School of Courage program by WockHardt Foundation & supported by Accenture.