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How P2P platforms create credit profile of borrowers

Have you ever wondered what these platforms look for in a borrower?

, ET Online|
Feb 06, 2019, 12.31 PM IST
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Some of you know that P2P lending platforms are a convenient option to secure a personal loan quickly. But have you ever wondered what these platforms look for in a borrower? Simply put, P2P platforms, unlike banks, look at an applicant’s overall credentials, apart from her credit score and financial status.

“There are various factors like income, dependants, stability, existing loans that determine the credit profile of a borrower. We have a rejection rate of around 80 per cent, which means only 20 per cent of the applicants get the loan after being evaluated on these parameters,” says Surendra Kumar Jalan, MD and CEO, OMLP2P.

“Applicants should be upfront in sharing information to avoid rejection. Once you become a borrower, pay all your EMIs on time to maintain a good credit profile,” advises Jalan.

P2P platforms divide borrowers into different categories based on their risk profile. If the required CIBIL score for banks is 750 out of 900, it may be around 600 for some P2P platforms.

“The credit score defines the loan amount, tenure and rate of interest. However, we have 135 parameters to select a borrower,” says Vinay Mathews, CFO, Faircent.

“Rejected customers are sent a document on how to improve their CIBIL score. As having a bad score may have manifold ramifications. Besides banks, companies which are in the financial services sector may look at an applicant’s credit behaviour before offering him a job,” feels Mathews.

The 33-page e-book describes concepts like debt and options available to deal with debt. The document also speaks about how to become a good and responsible borrower.

P2P platforms also follow a different process from banks when it comes to selecting a borrower. “The first difference in banking and P2P lending is the audit versus assessment approach. Borrowers are listed on the platform after all the necessary checks. Our rejection rate is as high as 89 per cent. However, P2P platforms offer better communication, better clarity than banks even in case of a rejection,” says Sanjay Darbha, Founder & CEO, Peerlend.in.

Peerlend.in claims of having 11,000 borrowers and 600 lenders listed on the platform without a single case of default.
“We have disbursed Rs 5.5 crore worth of loans so far with zero NPAs. There has been just one delay but our team is in touch with the borrower,” says Darbha.

To keep a check on the default rates, P2P companies need to extra vigilant while credit profiling the borrowers. “One of the best ways to maintain credit profile is to avoid cheque bounces,” says Darbha.

Peerlend.in also provides mandatory loan insurance to protect lenders’ interest and make the borrower more accountable. “It’s mandatory for the borrower on our platform to be insured by HDFC Life to the extent of the loan amount. A one-time payment of Rs 200-250 as insurance premium is made for a 40-45-year-old borrower. The cover can also be pre-closed if required,” adds Darbha.

Also Read

Faircent launches book on P2P lending ‘Every Percent Counts’

RBI caps lending on P2P platforms at Rs 50 lakh

Sachetisation of loans: It may already be happening with P2P Lending

Prove regulatory hurdles, RBI writes to P2P firms

NBFC-P2P Association appoints Faircent’s Rajat Gandhi as its new President

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