Peer-to-peer lending, also referred to as P2P lending, is an alternative financing method which allows individuals to avail loans from other individuals through online lending platforms. Through these platforms, borrowers who seek unsecured personal loans can get in touch with investors who are willing to lend to them with the intention of earning a higher return on their investments.

Lenders can diversify their investments by lending to multiple borrowers in small amounts. Also known as crowdfunding or social lending, P2P lending is gradually gaining popularity among borrowers and investors in India.

Features of Peer-to-Peer Lending

The P2P lending system raises loans for individuals who don’t have access to traditional banking systems from persons who want to invest their money.

By eliminating the need for a banking system or a financial intermediary in the borrowing and lending process, it extends credit to individuals who can’t avail it through financial organisations.

The main principle of this system is to offer benefits to the borrowers as well as the investors.

While it facilitates people to borrow funds at low-interest rates, it also enables savers to earn a good interest on their saved amount.

The entire process is conducted through online platforms where both the lenders and the borrowers register themselves and directly get connected with each other. Only after doing a proper assessment, the members can participate in the transactions.

All peer-to-peer lending platforms are regulated by the Reserve Bank of India.