During our lifespan, we come across many situations where we require loans. We often need loans for education, buying a phone to renovating your own house.
What do we understand by loan?
A loan is a sum of money borrowed by an individual or a business and is expected to repay it in the future with interest.
These are either acquired through financial institutions or nowadays there is also an option for acquiring instant loans. The terms for the loan are agreed by both the parties. Taking loans have the role of both lender and the one who wants to borrow, here the rate is decided, which recipient has to payback along with actual sum.
Role of Interest rate
The total sum that lender charges with consuming assert is interest rate. In this the charge is applied to the principal of the actual amount of the loan. Here rate is the cost of debt for the borrower and the rate of return for the lender. Typically, ongoing rate is around 15%.
Low interest personal loan
A low-interest personal loan is where the consumer is charged interest rate below 12%. The course of this loan is same like any other; you borrow money and then pay it back with interest and fees. To qualify for a low-interest loan from most lenders, you typically need to have a credit score above 720 and a strong financial history.
Drawbacks
Bright side
P2P Lending
A platform where people who wish to invest their money can do so with people who wish to borrow. This concept is based on investors getting good returns by lending their money and borrowers getting lower interest rates on the loan.
In India, peer to peer lending is currently regulated by the Reserve Bank of India, India's Central Bank which has published a consultation paper on regulation of P2P lending and the final guidelines. There are 30 P2P lending platforms in India.
Paisa Dukan became the first new entrant in Peer to Peer Lending market to get certificate of registration (CoR) from the Reserve Bank of India (RBI). In 2019, two more companies, Rupee circle and India Money Mart, were licensed by the RBI.
Why P2P lending still a forgotten hero?
In today’s scenario, Indian consumers are borrowing loans for almost everything from buying high-end gadgets, taking a vacation to Switzerland to buying a luxury car. This kind of a financial process has not gained much publicity because of the nature of Indian investors who refrain themselves from taking any risk .
Though it has been quite beneficial for borrowers who previously failed to get qualified or have low credit score.
Output and Input
In the data research provided by RBI, these platforms have achieved less than 100 crore of distribution per annum whereas non banking economic companies have distributed rupees 2 lakh crore between March to September last year.
Only a few approved platforms have managed to rise institutional funding. Most are still at the stage of flourishing and looking for an opportunity.
There are many reasons for downfall of these kinds of loans in India like limits that central bank has put on the business to prevent it from creating any systemic risk to the economy.
While a lot of Indians still don't prefer investing online, there are many who are giving it a chance and have seen significant growth in their money, which promises a bright future for P2P lending platforms.
Rajat Sahoo, is associated with Finzy and have years of experience of the domain. I love to read and write about latest and useful tips for clothing, Fashion and lifestyle.