Types of loan – In terms of lender

In the previous blog, we had mentioned how short term loan and long term loan are helpful to the borrower. We also made you aware with the 2 types of loan: Short term as well as long term. In this blog, we will focus on how lenders are benefited be it short term loan or long term loan from the entire process.

Short term vs long term loans – lender perspective

Let’s take an example. Ajay, got his salary. He has been doing some minor investment here and there. He believes investing the money and living on the fruits that ripe out of it. So while he was talking to his friend, he happened to mention about his idea of investing in a place where he can maximize his amount. Since his friend has already made a transaction with FinancePeer, he recommended him about peer-to-peer lending. Since Ajay wanted to invest Rs 10,000 , he was a bit hesitant. Because what if he wants to use that money later? He can only use the interest generated out of it, which happens in other traditional system.

His friend made him google FinancePeer and he also acknowledged him on the fact that if you invest 10,000 you can withdraw your principal amount any time you want. There was a glow on his face. But he was not convinced yet. There were many questions going in his head like :

  1. What is the rate of interest?
  2. What is the tenure?
  3. Do i have to pay any fees unlike traditional system
  4. Is it secured?
  5. Can i trust them with money?
  6. How long will the transaction take?

So after googling everything, he came to know exactly what will be more feasible for him. He got to know that for Rs 10,000 he has to go for short term plan, wherein a minimum of 100rs lending is needed. The general range for short term is upto Rs 60,000. The is no specific tenure unlike borrowing. The interest rate for short term loan is upto 37% which means 2.6% -3.1% per month. Getting to know this, Ajay’s happiness knew no bound. He was happy because if he invested his Rs 10,000 for a year, he would receive interest upto 37% by the end of the year. Also he can withdraw his amount anytime he wants and enjoy interest on the amount till that particular day. There are no charges for the lenders. That is, no transaction fees is taken. The time it takes for the transaction is barely a few minutes. The only negative part about this type of loan is : FinancePeer doesn’t provide security to the lenders. It means that if the borrower defaults, no security will be given from the company’s end. Everything seemed okay to him and he went ahead with lending. He was happy because he knew that the place his money is invested is safe and sound.

Long Term Loan:

Ajay has Rs 80,000. He is looking for investing his amount and enjoying the benefits out of it. He goes to the traditional system. Invests his money and waits desperately for the interest. Meanwhile he met his brother. He told his brother about the idea of him investing such a huge amount and enjoying the interest. His brother was happy for him, but he knew a firm which is much better than the traditional system, which has many advantages over the traditional system. He introduced him to FinancePeer and also to long term loan concept. He made him explain that there are no restrictions on lending in FinancePeer. The minimum lending amount for a long term lending is from Rs 60,000 to Rs 4 lac. There is no tenure. You can invest for 10 years as well. Now there are two options, if you go for 100% security or no security. 100% security means even if the borrower fails to repay the loan, FinancePeer will take the necessary police actions for the lender. The lender need not worry. The interest rate range is from 11.23% – 19.6%. If the lender goes for full security with 80,000 , the interest rate will be around 12% pa. That is the interest rate is around Rs 9,600 for a year. The rate of interest has been calculated by assuming that the lender is going for 100% security and 80,000 rs as the principal amount. There is no processing fees. It’s completely free. Getting instant access to borrower’s profile. Hearing all of this, Ajay was shocked. He din’t know that there exist such a company which gives great ROI and allows you to withdraw the principal amount whenever you want. If Ajay wants to withdraw his amount in first couple of months, he will be given interest till that particular tenure.

He went down to FinancePeer after researching online, understood the peer-to-peer lending concept and went for the same.

6 Comments

  1. Akshay

    Well explained !

    Reply
    1. user (Post author)

      Thankyou! 🙂

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    1. user (Post author)

      Hi, the comment is much appreciated. I think there are some issues. Let me get back to you on the same.

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