- August 22, 2021
- Posted by: admin1
- Category: DPN Topics
Subject – Economy
Context – Fintech platform CRED has launched a peer-to-peer lending feature called CRED Mint.
- P2P lending is a form of crowdfunding; an online platform that matches lenders with borrowers in order to provide unsecured loans. The borrower can either be an individual or a business requiring a loan. A fee is paid to the platform by both the lender and the borrower.
- P2P lending is not a new feature. In 2017, the Reserve Bank of India had brought this service under its regulatory purview.
- In P2P lending, users sitting on idle money provide loans to potential borrowers identified by the service provider. These lenders then receive payments from the borrowers on a set basis — either one time, or in equated monthly instalments.
- Some of the major companies operating in this space include Rupee Circle, Finzy, India Money Mart, etc.
Risks associated with P2P lending –
- One of the biggest risks associated with this kind of lending is the non-repayment of loans.
- Given that P2P lending is a form of unsecured loan, there is no guarantee put up by the borrower for the lender to redeem in case of a default.
- However, the unsecured nature of the loan is also the reason behind the high return on investment compared to other debt instruments.