It is a very competitive world. If you don’t show efficiency in your work, you might have to suffer, right? The same concept is applied in this scenario. There is a huge competition between p2p platform and traditional financial system. The job of traditional financial system is to have a win-win deal for both: lenders and borrowers. But considering today’s scenario it seems that the situation is vice versa.
Traditional financial system try to maximize their profits by caring very little about their existing customers. They tend reject loans because of following reasons:
- Weak credit history: If you have a weak credit history, it is likely that your loan will get rejected. A credit score is a 3 digit number which tells the creditworthiness of a borrower. A good credit score is generally considered to be in the range of 700-850. Below that it is considered to be average and bad. To know more about credit score, click here
- Employment stability: A loan is given to an individual only if he has a job stability. The minimum number of years he should have been working is 2. Only when he/she completes 2 years of work, he will be eligible to get a loan.
- Employment type: Another reason why loans get rejected is the employment type. Employment type means the job profile.
- Loan amount: Let’s suppose that Ram is in need of money. Let’s say Rs 10,000. Ram goes down to the bank and apply for the loan of Rs 10,000. Ram’s loan application will be rejected: because banks do not provide such short term loans.
- Education qualification: Another factor which contributes in rejection of loans is education qualification. It basically depends upon the salary of the employee but the better the education, the more salary he is intended to get.
- Changes in the documents: If you change your residential address, and it is only reflected in few documents where it is not in other documents, then bank will straight away reject your loan.
Now let us consider peer-to-peer lending platforms and let us see how p2p helps to get over such flaws and how it is a win-win deal for lenders and borrowers:
P2P is a relatively new platform. Not many people are aware about the existence of this platform. Though the concept of p2p is huge and widespread other nations. So what basically is p2p? P2P is a peer-to-peer lending platform which makes the borrowers directly meet the lenders on the platform and exchange money. Unlike traditional financial system here the borrowers need not go down to the system and manually apply for the loans with all the documents. The process is completely online. Here are a few features why P2P is preferred over traditional banking system.
- Credit history: If an individual has a score lower than 750, his loan application won’t be rejected. It will still be accepted. This is the beauty of p2p platforms. Even an individual with low credit score can now get loans.
- Loan amount: Ram now gets to know about p2p lending. He thinks he might get a loan. The reason why Ram thought in this manner is because in p2p, you get loan starting from Rs1000. That is correct! You can now get a short term loan, as low as Rs 1000.
- Employee education: Employees education doesn’t matter in p2p provided that other factors are good because not only education is taken into account, but other factors are also taken into account.
- Employees qualification: Employees qualification is not taken into consideration, provided that he has a fixed income.
- Changes in the document: Even if some changes are reflected in the document and some are not, still, the loan application is still considered.
Apart from these benefits, the major reason why you should invest in P2P is because here, you won’t be lending your money to the system, you will be directly lending it to the person in need. Hence your money will flow in the market and hence, it will help in reducing economic disparity. Apart from that, you can choose whom you want to lend your money to. And also, help the person in need of money directly. And another major perk is of enjoying high rate of interest on your investment. (To know more about the investment rate, you can click here.) If you are a borrower, then you can enjoy low EMIs, get loan application approved with a couple of minutes, freedom from long and tedious lines for getting loan application approved, hassle free and a free process. (To know more about borrower, you can click here.)
To summarize, there are many advantages of p2p over the traditional financial system and this is why, one should opt for p2p, rather than traditional financial system.