5paisa Loans Blog

How to choose a platform to lend?

By Anurag Srivastva | 18 Mar 2020

Peer to peer lending (P2P lending) broadly involves 3 parties; the lender, the borrower and the P2P lending platform. Lenders and borrowers are literally spoilt for choice with a number of P2P lending platforms active in India. Personal loan lenders and borrowers can come together and interact on any of these platforms and close out loan deals. That brings us to the million dollar question; how to choose a platform to lend.

Insist on no charge platforms

Quite a few P2P lending platforms charge you a fixed membership fee, which adds to your cost. Since you are anyway going to pay a success fee to the platform, look for platforms that do not load upfront costs. Ensure that such platforms have obtained NBFC-P2P license from RBI and check a copy of the license before taking the final decision.

Creditworthiness check of borrowers

This is the most important aspect of P2P lending. You need a platform that does a thorough and granular background check of the borrower and shares it transparently with the lender. Focus on the number of variables that the lending platform considers to arrive at a credit profile of the borrower.

Palate of borrowers on the platform

This is an interesting point to look at. Normally, if the P2P lending platform is very small, then you have limited choice of borrowers. The more established P2P lending platforms are able to offer a full range of borrowers with different credit profiles and different risk implications and yields.

Customer orientation of the platform

Who is the actual customer of the P2P lending platform? Is it the lender or the borrower? The answer is that both are the customers of the P2P lending platform. Focus on a platform that balances their diverse requirements. Lenders should be able to get the best yields for the level of risk assumed.

Follow up services to lenders

The P2P lending platform cannot just be a dispassionate platform. It has to provide the lender follow up services like updates on credit records of borrowers, follow up with borrowers, handling procedural and legal matters pertaining to recovery etc.

As a P2P lender, focus on getting the best value for money from the lending platform.