If yes, then peer-to-peer lending may be an investment approach that deserves contemplation.

What is Peer-to-Peer Lending?

Peer-to-peer lending enables you to lend money instantly to borrowers. It dramatically cuts out the broker, the bank or lending organization.

Lenders or individual investors and borrowers generally smaller organizations or individuals connect with each other online via a P2P lending company or platform.

For borrowers, P2P lending grants numerous advantages over conventional lending practices:

• competing interest rates
• insignificant paperwork
• faster judgments for approval

This comparatively new market is advancing swiftly. PriceWaterhouseCoopers predicts the P2P lending market could equal $150 Billion by 2025. 

Loan-based crowdfunding or as we call it peer-to-peer (P2P) lending, has been evolving as a disruptive force in the lending market in recent years. The major markets for the crowdfunding industry are the U.S., U.K., Europe, and China. 

Let us check out P2P business models, different perspectives of risks and possible risk management chances for the loan-based crowdfunding industry to adopt, concluding with indications for banks.

P2P lending app business model

⇒ Crowdfunding Business Models

According to the International Organization of Securities Commissions (IOSCO), the two overarching business models for P2P lending are the notary model and the client-segregated account model.

⇒ Notary model

This is a P2P lending business model where the borrower visits the online platform and presents the completed application form for a loan. The borrower’s risk profile is investigated using the loan-issuing bank’s underwriting guidelines. The application is approved after checking the risk involved. The borrower’s loan specifications are ordinarily posted on the platform’s website for investors to study and fund.

Once enough investor commitments are received the loan amount is transferred to the borrower. Once the loan is disbursed, the things proceed from investors are used by the borrower to obtain the loan from the issuing bank. 

Investors who fortunately bid the loan are technically circulated a note by the platform for their benefit of the contribution. The notary model displaces the risk of loan nonpayment away from the issuing bank to the investors themselves.

⇒ Client-Segregated Account Model

In this business model, a contract is settled with the help of a mediator platform by pairing the particular lender and the borrower. Lenders provide their funds to individuals or businesses in one of the following ways.

• Automatic lending based on the platform’s arbitrary allocation process
• Manual requests for allocation based on the lender’s decision

This model is different from the notary model as the issuing bank is not involved. The funds are transferred directly between the lender and the borrower.

The P2P platform allows funds from lenders and borrowers to be distributed from an intermediary’s balance sheet and resisted through a legally separated customer account. The intermediary doesn’t have any claim on the funds in the event of the platform’s failure.

There is a third business model which is widely practiced in China. It is called the Guaranteed Return model. Here lenders anticipate a fixed rate of interest on the loaned amount. According to the market reports, investor enthusiasm to follow this model is huge but it is less in demand from the borrower.

So how do P2P lending platforms make revenue?

The most important selling point for P2P lending platforms is their transparency. The levels of hierarchy, heaps of paperwork, the hidden and hard to understand fees and payment schedules in the banks have been the subject of distress in recent years. From the beginning of P2P lending, the most coveted features have been its simplicity and transparency. So, looking at all this, the P2P platforms have a page devoted to the fees they charge and even go so far as to describe in easy words how they are making money!

Every platform has a somewhat different fee structure than the other. Let’s discuss the different types of fees that P2P platforms charge and how can you earn with our P2P white label solutions!

Peer-to-peer lender’s fee structure:

⇒ Fees charged from borrowers

Most platforms are moving away from the fee model that targeted both lenders and borrowers. Instead, they are charging both lenders and borrowers. For example, the platform Landbay has two fee charges for borrowers:1. The borrowers are charged with an upfront fee ranging from 2% to 2.5%. This fee includes the cost of screening profiles and the establishment of a new loan. 2. The second fee is 0.5% to 1.00% margin (per year) on the loan principal outstanding.

⇒ Fees charged from borrowers and investors both

Another P2P platform Proplend is a platform that charges fees from both borrowers and investors.

Borrowers ought to pay a Listing Fee and a Completion fee. Also, mortgages are secured against property. And hence, the legal and valuation fee incited in establishing a loan is also borne by the borrower.

P2P investors need to pay a fee equivalent to 10% of interest collected.  

The P2P platforms can also collect fees if they provide some API to others interested in using the platform. 

Conclusion

As a P2P lending platform, you can charge various fees for the services that you provide. You can provide investors a chance to earn arguably the most approving interest rates granted on the alternative investment market. And the borrowers can be offered means to borrow money without the hassle of conventional banks.

With our customized white label solutions, we can provide you guidance for the best suitable business model for your P2P lending platform and means to generate more revenue. We can also provide you a platform with the latest technology and extraordinary features. Using our white label solutions you can even provide API to the clients that are interested to provide their services through your platform. 

Connect with us to discuss in detail how to make more money with our P2P lending platform.

The post P2P lending app business model: Is Peer-To-Peer lending a guaranteed way to make money? appeared first on Coruscate Solutions.

Peer-to-peer lending extends to grow in prevalence. It is getting a much more viable option for people who require the money and for people who want to invest their money.

With the changing times, the way we borrow money and the way we invest money is changing. In the previous era, if a loan was required to pay off your car or credit cards, the best possible option was to go to a bank or a credit union. People were forced to sit down with a loan officer and wait for them to tell whether the loan could be approved or the numbers needed to be crunched. The traditional investing always included a broker whether it be online or in-person.

But since there has been an advancement in technology and digitalization being embraced in every field, people prefer going to each other instead of going to banks and brokers. Peer-to-Peer lending is all about helping each other rather than relying on big banks with huge interest rate.

Peer-to-Peer lending has skyrocketed with the creation of Prosper around 2005. According to a study, since the year 2006, P2P lending has seen an annual growth of about 110 percent. And we do not find it slowing down either. With more and more marketplaces leaping every year, the prospects have become overwhelming.

Let’s study some of the best Peer-to-Peer lending apps and the takeaways from these apps for your business venture:

1. Prosper

 
Prosper app is one of the oldest one dealing with P2P lending in the market. The Prosper platform was founded in 2005. They were the very first peer-to-peer lending marketplace in the U.S. They claim to have coordinated over $12 billion in loans to more than 770,000 people.

» Borrowing with Prosper

The borrowers can get personal loans up to $40,000 with a fixed-rate and a fixed-term of three to five years. The monthly amount is fixed for the term of the loan. You can even pay off the loan early without getting penalized. You can get an immediate look at what your rate would be. Once your loan is approved, the money gets transferred directly into your bank account.

» Investing with Prosper

If you are an investor, there are many options on loans to choose from. There are seven distinct risk categories to select from with their own calculated returns and level of risk. 

2. Lending Club

 
Another P2P lender similar to Prosper is Lending Club. They started two years later than Prosper, in the year 2007.

» Borrowing with Lending Club

There are four different types of solutions offered by Lending Club for borrowers:

• Personal loans: Lending club offers loans up to $40,000 which can be used for any of your personal agendas like clearing off debt or paying off credit cards.
• Business loans: A business loan up to $300,000 is offered. There is a fixed term of one to five years without any prepayment penalties. The only condition to qualify is to be in business for at least 12 months, have at least $50,000 in annual sales, having a good business credit, and own at least 20 percent of the company.
• Auto refinancing: The Lending Club app also makes it possible for you to go for an auto refinancing loan.
• Patient solutions: The app also works with doctors all over the country. They help you to finance your medical bills. You can get up to $50,000 for all sorts of bills and surgeries—including hair restoration, fertility, and weight loss surgery.

3. Peerform

 
The P2P platform Peerform was founded in the year 2010. The founders were a group of Wall Street Executives who had experiences in both finance and technology. They had a perfect combination to start a P2P lending platform. They wanted to provide their borrowers with a positive experience and with a loan process that was clear, fast and fair.

» Borrowing with Peerform

Borrowers are offered loans from $4000 to $25000. The rate of interest is fixed at 5.99 percent. There is an origination fee of 1 to 5 percent when the person receives a loan but that is just for one time.

» Investing with Peerform

The investors are allowed to choose between two different types of products with Peerform. They are Whole loans or fractional loans. You can also customize your investment with the customization options that are available so you can get the most diversified selection possible. 

4. Upstart

 
Upstart is another innovative Peer-to-Peer lending platform. This platform was founded by 3 ex-Google employees. Along with the P2P lending platform, they have created a spontaneous software for banks and financial institutions.

The unique thing about Upstart is how they determine risk. They have created a system that uses Artificial intelligence to assess the risk of the borrower. This strategy of usage of technology has significantly lower loss rates than some of its peer companies.

» Borrowing with Upstart

Upstart offers loans from $1,000 up to $50,000 and their rates as low as 8.85 percent. The terms are between three to five years and there is no prepayment penalty also.

Upstart uses its artificial intelligence to not just look for your FICO score and years of credit history, but they also consider borrower’s education, area of study, and job history before concluding your creditworthiness.

» Investing with Upstart

Unlike other P2P platforms, investing with Upstart allows you to set up a self-directed IRA using the investments from P2P lending. All investors are attracted to this unique feature. 

Scope of P2P lending and Coruscate as your technology partner

 
Now is a great time to invest in the development of P2P lending. The global P2P lending industry is valued at $3.5 billion in the year 2013. After 2 years, in the year 2015, it was valued at $64 billion. The P2P market size is expected to be worth $1 trillion by 2050. So, P2P lendings are going to be part of our lives for a longer period of time and the soon this is understood by the startups the more profits they will earn.

If you are planning to develop a FinTech application, we can help you out with the best selling features in the market and an app with an amazing user interface to attract your users. 

Here is a chart showing the cost of FinTech app development having basic features:

We are happy to help you with any further queries regarding P2P lendings and FinTech app development. Feel free to connect with us via contact us form and you can also ask for a free demo.

The post Top 4 P2P lending apps of 2019 and their business models to study for your FinTech app development appeared first on Coruscate Solutions.