Businesses are more inclined toward P2P with the increase in its popularity. The exposure to P2P resulted in the growing trend of borrowing and lending. It brought lenders and borrowers on the same page. Individuals lend or borrow funds seamlessly, with no long procedures compared to the traditional loan process. The peer-to-peer model contains many features over traditional lending with better return rates.
In this blog, let’s explore the reasons for the growing popularity of P2P over traditional banking and why lenders should consider P2P solutions in credit lending and borrowing?
Why the need for Blockchain In P2P Lending?
The P2P lending industry is flourishing with massive potential. However, there are a few factors, pulling back P2P lending, such as intermediaries and inefficient infrastructure. Take a look at what blockchain can bring to P2P lending.
● Cutting Down the Fees
Currently, P2P is operational with the help of intermediaries, which causes a higher cost in P2P lending. Blockchain can cut down the high fees problem by automating the transactions and eliminating the intermediaries from the space.
● Faster Lending Process
P2P lending involves a lot of paperwork to perform the lending processes. Resultantly, getting a loan became tiresome and time taking. Therefore, blockchain helps P2P with smart contracts that cut the role of paperwork. Thus, the loans can be processed abruptly.
● Better Rates
In the P2P lending market, the interest rate is fixed. In P2P lending backed by blockchain, demand and supply cause fluctuation in the interest rate. Therefore, the lender can benefit from very low-interest rates as the demand rises.
One of the core features of blockchain is transparency, which ensures transparent interest rates in P2P lending platforms. Additionally, the complete lending process becomes fraud-free because of the costs and time involved. Therefore, marketplace participants can use different strategies to maximize profits by trusting the platform.
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Because of the direct connection between the lender and borrowers, blockchain-backed P2P offers flexibility in certain areas, such as deciding the interest rates, repayment duration, and repayment frequency. Moreover, a smart contract, instead of the involvement of a middleman, executes all these settlements. Therefore, fraud or late repayments are almost impossible.
Reasons for the Popularity of P2P lending
● Higher Returns
For investors, peer-to-peer lending offers significantly higher returns than traditional savings accounts and fixed deposits. According to reports, lenders investing in alternative lending platforms have been earning gross returns from 18 to 26% per annum.
● Lower Interest Rates
With personal and consumer loans, banks charge high-interest rates to consumers. Sometimes, the interest rates can reach up to 20% of the loan amount. Contrariwise, p2p crypto lending software development.
Getting a loan through a P2P lending platform is workable. It can cut short the lending time and is free from the cumbersome loan origination processes of conventional banks. The result is that people can get loans within a few days without going through many legal formalities.
Governmental authorities do not regulate P2P. Therefore, getting loans or investing funds on the p2p lending platform is comparatively easier than using conventional banks. Moreover, P2P facilitates investors to withdraw their money at any time. All this is possible on a safe and secure platform, free from government interventions.
● Investment Choice
Like mutual funds, P2P lending platforms allow users to keep track of how much and where their money will invest. Lenders are only interested in investing in the loans that they find suitable and profitable.
● Customized Products
P2P lending deals in customized products that cater to various loan quarries, such as occupations, gender, demographics, etc. Whether you need a personal loan to cover your education expenses or to meet the working capital shortage in your business, peer-to-peer lending may be the answer.
● Higher Ability to Take Risks
If you are one of those borrowers who are willing to take high risks, the chances of you getting credit from traditional financial institutions are negligible. P2P lending, however, is a more risk-averse solution, driven by young entrepreneurs and lenders with a larger appetite for risk.
● Convenient and Fast Loans
P2P lending platform follows a seamless, fast, and online process that ensures the fast processing of loans. P2P lending’s online contactless operations were also able to provide credit to those in need during the pandemic lockdown when bank visits were not possible.
● No Credit Check
A poor credit score can leave a lender in trouble for getting a loan from a bank. Moreover, if the user has no credit history, banks will not grant them a loan. Therefore, with a P2P lending platform, anyone can get credit from this platform.
The Peer to Peer Lending Software is furnished with far better features than the traditional sector. For example, it assists in secure access to credit.
Hashlogics is a p2p crypto lending software development agency with a proven record of P2P solutions. If you are looking for white label peer to peer lending software, we can help you out in developing an efficient p2p platform.