Peer-to-Peer Lending (P2P) is a Reserve Bank of India approved investment platform.
Individuals and Non-Individuals like companies, HUF, and others can Invest in P2P Lending.
We at VRIDHI Money Advisors will help you in all aspects of P2P Lending.
The banks borrow money from the investors commonly known as Fixed Deposits and pay them a yearly return in the form of interest rates. The banks lend this money to those in need of personal and business purposes. The money lent to the borrowers, and the banks charge an interest rate higher than the Fixed Deposit.
Illustration: Mr.X takes his money, say Rs.1 Lakh, goes to a bank and starts a Fixed Deposit @ 7% p.a. Mr Z requires capital for expanding his business. He borrows Rs. Lakh from the bank as a Business Loan at a rate of 15% p.a. The difference between the bank’s borrowing rate and the lending rate 15%-7% = 8% is the bank’s profit.
In P2P lending, an individual can borrow money directly from other individuals using Peer-to-Peer Lending websites.
Thus, you skip the services of institutions like banks, increasing the possibilities of generating higher returns on your investment.
Different types of Loans which your money is lent as.
All Financial Institutions raise money in the form of Fixed Deposits, Bonds, Debentures, etc. If you notice the rate of returns on these instruments, they are always almost close. FD’s may give you 6%, Debentures 8% and the Bonds 7% with small variations. This money raised at an average rate of 6% to 7% interest rate is lent in different forms, and at different rates, a few examples are:
- Housing Loans: 8%-9%
- Vehicle Loans: 10%
- Business Loans: 12-15%
- Personal Loans: 15-18%
- Credit Card Loans: 36% and above
Your money is lent at average of 12-15% while you make not more than 7% *(All the rate estimates as on July’2020)
P2P Lending Platforms allows you to lend the money directly to the above borrowers, and you enjoy the benefits of higher returns than that of Fixed Deposit or a Bond.
The Peer-to-Peer Lending System
How to proceed?
- Open an account with a P2P lending platform Vridhi recommends.
- Transfer money to the escrow account.
- Start choosing the borrowers and start lending.
- Receive a better return than a Fixed Deposit.
- Reinvest or choose to withdraw the money as and when received.
Rs.50 Lakhs is the maximum amount allowed per PAN number in P2P. *As on July’2020.
VRIDHI will help you choose the right platform and also help you manage your portfolio.
VRIDHI will help you screen borrower risks and choose the best portfolio.