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Pay for surgery via a cheaper P2P loan

Processing work on peer-to-peer platforms faster, top-ups usually easier than banks.

, TNN|
Last Updated: Nov 30, 2018, 05.31 PM IST|Original: Oct 23, 2018, 02.59 PM IST
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Watch: Peer lending platform might be better for medical borrowing
Watch: Peer lending platform might be better for medical borrowing
(This story originally appeared in on Oct 23, 2018)
If you need a loan for a medical emergency like a surgery, it might help to turn to your peers rather than institutions. Peer-to-peer (P2P) lending platforms say they have seen lenders willing to offer interest rates between 8% and 12% for medical emergencies on their platforms. On the contrary, if you try to raise funds as a personal loan from banks, the interest rate is likely to be between 13% and 17%. P2P technology platforms bring borrowers and lenders together, and most offer a variety of loans, including personal loans, vehicle loans, educational loans and — in some cases — even home loans. Most lenders tend to be individuals too.

P2P players like Faircent, LenDenClub, i2iFunding and LoanTap say they also process medical loans faster. “It takes banks five-seven days to process a medical or personal loan. We normally process 60% of our loans the same day, and the rest by the next day, including documentation work and underwriting,” says LenDenClub CEO Bhavin Patel.

Amit Patel, 29, a purchase manager in Pune, needed Rs 3.5 lakh for his father’s gall bladder operation. He had only Rs 50,000 in hand, and no insurance. “I approached everyone, and eventually the help desk at the hospital referred me to LoanTap. I took a six-month loan of Rs 3 lakh, and I’m paying an interest of only 1.5%,” said Patel, who was lucky to get a particularly generous lender.

Digital lenders also offer top-up loans and have no charges for foreclosure. “Also, if there is an additional requirement the next time they approach us, we process it even faster (because the platform already has the borrower’s details),” says Patel. Up to 7-8% of LenDenClub’s total loan disbursement consists of medical loans.

LoanTap even offers interest-free medical loans for those with insurance — but this is done to attract users to the platform and encourage them to use it for other kinds of loans. “Sometimes the hospitals will ask the customer to use their credit card (which carries an interest rate of 25-35%) and ask them to get reimbursements from the insurer. This is a loss for the customer. So we came up with the interest-free scheme,” says Loan-Tap chief executive officer Satyam Kumar, which has tied up with select hospitals in Pune, Mumbai and Bengaluru for this facility.

In medical loans, some checks are undertaken by executives of the platforms to ensure the loan is indeed being taken for the stated purpose, and not to, say, buy a mobile phone or to travel. “Our decision-making is a combination of algorithms and human interaction,” says Vishwas Dixit, CEO and co-founder of P2P venture Finzy. Dhiren Makhija, CEO of P2P player Cashkumar, says they are more sensitive when it comes to medical loans.

P2P lending runs the risk of defaults, but the rate of default, at about 2-3%, is no more than for banks. Some platforms take the risk on themselves, assuring lenders that they will make good the money in case of a default. But this is likely an effort to attract more lenders to the platform, considering the segment is new. As P2P matures, risks will likely be borne by lenders.

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