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This article is more than 2 year old.

Here's a step-by-step guide to making P2P investment

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Peer-to-peer (P2P) lending is a debt financing method between a lender and a borrower, without an intermediary such as a financial institution.

Here's a step-by-step guide to making P2P investment
Peer-to-peer (P2P) lending is a debt financing method between a lender and a borrower, without an intermediary such as a financial institution.
The lending method, however, involves more risk and effort than borrowing from a bank. Loans under P2P lending are mostly offered by individual investors, who are willing to offer their money on an agreed interest rate.
Here's a step-by-step guide to make P2P investment: 
  • Select your preferred P2P platform for investment and create a login ID. The platform may also ask you to add your PAN card and address proof details.
  • After you sign-up, set up an investor account to start your financial transaction. The platform may ask for a one-time non-refundable payment of between Rs 500-Rs 1,000 during the sign up.
  •  Once the verification process is completed, your investor profile will be set up on the P2P platform. The profile will show your investment preference where offers are accepted on a 'first come, first serve' basis.
  • You can use your profile to send proposals to borrowers where the rate of interest on the loan borrowed can be decided mutually by both the investor and borrower.
  • Loan listings are visible on the lender's dashboard, along with relevant financial information such as credit and personal details. A lender can decide if he/she wants to hand out loans to a single or multiple borrowers.
  • A lender can provide loan up to 20 percent of the borrower's total loan requirement. As per the existing requirements, a lender can provide loan up to Rs 10 lakh at any given time across all P2P - NBFC platforms with a maximum of Rs 50,000 per borrower.
  • Once a deal has been struck between the lender and the borrower, both parties will sign a loan agreement, which will be binding in any court of law.
  • The lender can make the first deposit after the required documents are signed and the borrower has provided the required number of Post-Dated Cheques towards security and repayment of the EMI.
  • The transactions on a P2P platform is made through an escrow account. As per the guidelines set by the Reserve Bank of India (RBI), the investment platform is required to have at least two escrow accounts. These accounts are to be operated by a trustee promoted by the bank, which maintains these accounts.
  • Once the loans are disbursed, the lender will receive EMIs on or before the 15th of every month.
  • In case the borrower fails to make the EMI payment within a select time frame, a penalty is levied which the borrower pays directly to the lender.
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