Between conventional and unorthodox, lending has seen many changes throughout. Unlike earlier, today’s lenders and borrowers have multifold options in their hands. Out of all, the digital P2P platforms are on their way to become the new black in the loan sector.
When it comes to growth and popularity, people prefer a platform that offers ease of use, seamless customer journey, real-time analysis of information, and the highest level of data security. The P2P lending model has set the bars high, eliminated intermediaries, and provided borrowers with reduced interest. Investors can have a diversified portfolio and high-yielding returns with the P2P platform.
Moving ahead with time is essential to cope up with the fast pace of work today. There are a lot of things that occur within the blink of an eye. The traditional banking systems and loan processes still involve long queues and unguaranteed results. To stand up as a tough competitor, one needs to adapt to all new technology.
P2P lending platforms are a step ahead in the lending and borrowing industry. But, what has pros, has cons too. P2P lending is also associated with some risk factors and push-backs. Unfortunately, these drawbacks are misinterpreted by many individuals. It is essential to bring people back from fiction to facts. The following are some of the myths debunked about P2P lending.
It is only for millennials.
As the world is directed by the younger generation now, people believe that P2P platforms are only for them. Millennials indeed turn towards the gen Z P2P softwares because of the smooth experience. But, it can not be claimed that the softwares caters to the needs of only young adults. These platforms have been developed to ensure equal opportunities for all, old or young, rich or poor. The senior retired people use these platforms to divert their retirement funds to more productive investments.
It is uncertain and unsecured.
All the areas involving monetary benefits and significance are, in one way or the other, risky. The only difference is the level of uncertainty. In no case can it be said that there is no risk? But, the P2P lenders and buyers using the platform need to be sure of their research. Not all softwares are unsafe. It depends on the companies that offer the service. Reputable service providers offer security against any threats. So, it is the responsibility of the parties to see whether the platform they are using is trustworthy or not.
The credibility of borrowers is always unreliable.
If you find a random platform and invest in it without caring to take pains and find out the worth, the P2P platform is unreliable. The fact is that the service providers and software owners take the responsibility to check the authenticity and creditworthiness of the buyers. Most of them even verify the borrowers physically. If the receiver is likely to default, the platforms do not list them. Also, the lenders get the opportunity to see how creditworthy a borrower is. If they are not satiated, they can refuse to invest.
It is the same as crowdsourcing.
Crowdsourcing is also an alternative to traditional investing, and it is much different than P2P lending platforms. In crowdfunding, several people come together to fund a project or initiative. Whereas, in P2P loans, lenders and receivers come together to enter into a short-term loan contract. The loans are also unsecured. One borrower can get investment from multiple loan providers. Similarly, a single lender can lend to numerous borrowers.
It is a grey market.
People outrightly believe that a peer-to-peer lending platform is an illegal space. Other than some countries, P2P lending is abided by the law. All the activities happening on the software or platforms are under the guidance of a regulatory authority. If not that, the actions are governed by the service provider who has availed the permission by adhering to guidelines. In India, RBI has proposed P2P lending regulations, which include recognizing P2P lending platforms as Non-Banking Financial Companies (NBFCs) and protecting both parties.
There are two kinds of people- one who only praises the platforms and the others who have only bad experiences. It is essential to know the two sides of this coin and decide. As an individual of today, one must understand the importance of moving with technology hand in hand. P2P platforms are one such technological advancement that has allowed lenders and borrowers to fasten the loan process. Unlike traditional methods, P2P loans are much easier and simpler. There is no compulsion on anyone to invest or borrow. If one feels right, he/she can proceed. While the customer needs to research before availing of the financial service, it is also essential that the service provider offers clear information. Then only there will be no misconception.