P2P is spreading its roots in all the direction. It is gaining popularity all over the globe. People are preferring P2P over the traditional financial system because it is much quick, convenient and simple to use. If you are looking for investment plan then P2P is possibly one of the best place you can invest your money in. High return on your investments (around 37% PA) and low monthly EMIs is probably what you are looking for. Though P2P can yield good returns, your major concern would be the risk associated to it. For all you might know that it is a scam. In this blog, let us look at different ways to reduce the risk in peer-to-peer lending investment.
- Check the process of assigning a credit score: Check the company/platform’s way of assigning the credit score to a particular borrower. If the company has a proper and thorough method of doing the credit check, genuine borrowers you will get with very less probability of defaults.
- Check the borrower’s creditworthiness: Apart from checking the platform’s method of performing and assigning a credit score, one must always check the creditworthiness of the borrower. Meaning, if the borrower is in the state to repay the loan or not. Check all the details before you lend your money to someone (bank statements, income etc) . In this way, you can reduce the risk.
- Check if the platform has a recovery procedure: Checking if the platform has a recovery system is very essential because if by any chance, the borrower defaults, then there has to be a way within the platform can help you with the recovery of the defaulted amount.
- Diversification to reduce loses: Diversification is one of the most important concepts when it comes to lending in peer-to-peer platform. It is important in terms of the investments you make. As a lender, you should invest in all the possible platforms. The only reason being, you can choose from a wide range of borrowers and minimize the risk of defaults.
How FinancePeer helps in mitigating the risk ?
We understand that when it comes to money, you become very skeptical about all your investments, and it’s a good thing. Therefore we, as a platform, make sure that –
- The company has a very strict process in terms of assigning a credit score. If an individual has no score and is in need of money, the experts at Financepeer makes use of AI system to check 13,000+ data points and then give a credit score to make sure a correct score is generated. Hence the process is very thorough and nothing can be missed out.
- If a borrower comes to use our platform, an initial background check is done. He should meet the minimum income criterion in order to get listed as a borrower. We check all the documents like identity proof, income proof etc to make sure that there is no chance of him to default.
- We have a recovery procedure. If by any chance one of the borrowers default, the entire amount is given back to the lender only if the lender goes for 100% security option. The company can also help to register a police complain if the lender wishes to do so.
- There is diversity in terms of borrowers. The lender need not saturate all his money in helping one borrower, rather he can lend it to multiple borrowers which will help multiple borrowers to grow together as well as he will have multiple ways of income which is a good practice.
Peer-to-peer lending is the next big thing in India. US market has picked up the concept of P2P really well and it is spreading it’s roots in India. So to enjoy high returns on your money and to pay low EMI’s, come and join hands with FinancePeer today.