Investment Tips: The method of providing loans to the people through fintech is becoming popular. This gives huge returns. Know how you can also invest in it…
New Delhi. Banks make big money on our own money by giving industry, home loan, vehicle loan, education loan, but we get nominal interest. Therefore, now the method of providing loans to people through credit firms or fintechs is becoming popular in order to get higher interest or returns on their own money.
This new approach is peer-to-peer (P2P). Whatever amount you want to invest in this, credit firms or finance companies are giving it as a loan to the needy through the app. This can make you an opportunity to earn high rate of interest directly in the field of finance.
Two major fintech companies have recently announced their foray into peer-to-peer (P2P) lending. Fintech company Cred has launched a new P2P platform Cred Mint, for which it has joined hands with Liquid Loans, a P2P non-banking financial company registered with the Reserve Bank of India. Whereas, BharatPe has also decided to start P2P lending through an app called 12% Club.
How to benefit from P2P
Lenders on the P2P platform get an opportunity to earn interest at a higher rate. BharatPe says that the lenders will get up to 12 percent interest annually. Whereas, Cred is claiming to give returns of up to 9 percent to the lenders from its platform. Lenders on their platform can easily get 10-12 per cent annualized returns, says Bhavin Patel, CEO and co-founder of TransactionClub.
Less risk in lending
Lending platforms do not guarantee the amount lent for the loan, but they adopt a variety of methods to make it secure. They provide loans to people who are less likely to default. Not only this, they divide your money into small parts and give loans to many people, which reduces the risk. As such, the amount lent at Credit Mint is distributed among more than 200 borrowers on an average. TransactionClub does the same.
Patel explains that if you use the auto-invest feature, the amount of Rs 1 lakh lent on our platform will be distributed among 400-500 people using an algorithm. The lender can also choose to distribute the loan among a small number of people, if he so desires. Similarly, Cred will extend loans to only those customers who have been using its loan product, Cred Cash. According to the company, these customers have very high credit scores and the rate of default in repayment of loans is very low. In the last one year, the default rate on credit cash has been less than 1 per cent.
Don’t Ignore the Dangers of Defaulting
CA Harigopal Patidar points out that people who generally have low credit scores and who find it difficult to get loans from other places, usually come in search of loans on such platforms. This is the reason why these people are ready to pay high interest in lieu of the loan. Therefore, the risk of default is also high among the borrowers of such loans. Therefore, the option of lending on these platforms should be opted by those who have a high risk appetite and who understand very well that their capital can also be sunk here.
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