Do you know how your loan gets funded on P2P platforms

Updated: 15 Mar 2019, 06:38 PM IST

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Credit evaluation

This is the first thing that happens when a borrower submits an application with a P2P platform. Being a data-driven technology, P2P companies evaluate on various data points, including the personal and financial information of the applicant. This assessment determines the rate of interest on a particular profile.

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Borrower to approve rate of interest

Final decision on the interest rate is made by the borrower. Once the platform decides the interest rate as per the profile of the applicant. The borrower has to approve it before his loan is listed on the platform

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Fractualization

Fractualization is the percentage of the loan the investor plans to lend to a single borrower. The lender can either opt for auto-invest or choose borrower profiles manually. This helps him in creating a diversified portfolio to get better returns.

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Funding the loan

As per the RBI guidelines, the P2P platform needs to open two escrow accounts, one each for the lender and borrower to service the loan. These accounts are operated by a trustee, appointed by the escrow bank, maintaining the escrow account. The lender makes the loan disbursements through his escrow account and the borrower repays through his. P2P lending restricts any cash transfer between the parties and advocates that all fund transfers are made through banking channels only.

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