This is a guest post by Sunil Kumar, CEO of Loanmeet
Tragically, more than 78% of Indian population cannot get a personal loan from a bank or NBFC. Why? The reason is quite simple – most banks grant personal loans to salaried employees with annual gross salary above Rs. 3 Lakhs. Some banks give personal loans only to individuals earning Rs. 6 Lakhs per annum. If an individual is NOT working at one of the big MNCs or listed companies, then it would be a difficult for him to get a loan, or worse yet, his/her interest rate would be substantially higher. The P2P lending however, works differently; it comparatively uses multiple parameters to determine credit-worthiness of borrowers. The P2P credit models traverses beyond the salary of individuals; and fortunately, it does not decline the loan application even if the borrower’s salary is considerably low.
P2P lending, peer-to-peer lending amongst individuals, is not a new concept. It has been practiced for centuries. Even today, most individuals ask money for their short-term needs from friends and relatives. In old days, most individuals did not make EMI payments when they got loans from their friends and relatives; most loans were interest free, and as a victim of the evil perception of temporary profitability and eventual losses, there was a balloon payment at the end of the loan period. The private money lenders charge high interest rates, and seize land or jewelry for collateral. The online P2P lending model formalized the entire process of taking loans from friends, relatives, and unknown individuals, and made it simpler for us to get quick cash or earn great returns. The borrower puts an online loan application, and the platform either rejects or accepts the same. If the loan application is approved, then the lenders fund the loan amount. The loan payment is collected in the form of EMI payments, and sent to lenders. Continue reading