Today we will talk about services that in the near future will seriously compete with banks in the lending market.
As the gaps in legislation are closed and the share of electronic payments increases, the credit exchange and P2P lending with loan management software will be able to win a significant share of the market from banks. And MFIs with their “wild” interest rates will turn into the same relic as computer clubs or video cassette shops.
What is it and why is it needed
Let’s start by looking at how the traditional banking system works. The client puts money on a deposit at a small percentage. Further, the bank issues this money as loans.
Naturally, the rate will be much higher (10-12%). This difference is the profit of the lending institution.
But why should we share half of our profits with the greedy bankers? After all, you can lend your money directly, excluding the participation of an intermediary in the form of a bank. You just need to find a borrower.
A credit exchange is an Internet platform where potential borrowers interact with lenders.
In other words, here people who have free money can lend it at interest. This is called P2P lending.
How to work with the exchange
Any citizen can use the services of the credit exchange.
As a rule, it is enough just to register and provide scanned copies of an identity document. Further, it all depends on the reputation. It is much more difficult for a newly registered user to obtain a loan on favorable terms than for a user with a positive reputation in the service.
Advantages and disadvantages
For clients, such services are convenient – first of all – because of their simplicity and availability. The borrower does not even need to leave his home – the loan is issued and repaid online. Moreover, obtaining a loan and receiving money happens in the shortest possible time.
Of the shortcomings, only a fairly high percentage can be noted. A bank loan is cheaper anyway. But if we compare rates on the stock exchange and in the MFO, then the comparison will not be in favor of the latter.
For banks, these exchanges are an additional source of clients. They have already passed the initial check and are interested in obtaining a loan.
What exchange statistics should be taken into account
- Supply and demand volumes. The logic here is simple. The more lenders there are on the exchange, the higher the competition among them.
The amount of loans issued. This indicator speaks about the popularity of the exchange.
- Average loan term. As a rule, the higher it is, the lower the rate and the higher the likelihood of returning the borrowed money.
The number of outstanding loans and their share in the total amount of loans issued. This indicator characterizes the reliability of investments in this exchange. The low percentage of delinquencies indicates that the exchange seeks to cut off unreliable borrowers and helps lenders in case of problems with the return of their money. More info on https://djangostars.com/industries/fintech/online-mortgage-software-development/
P2P lending services are quite capable of spoiling the life of traditional banks. For investors, this is another tool of earning money, and for clients, it is an opportunity to get money in the shortest possible time, even with an unfavorable credit history.
The legislation on the issue of private lending has a lot of gaps and it is far from the fact that an unscrupulous borrower can be brought to justice. Even if you have the passport details of the person who took the loan, it may not be enough. For example, the borrower may be a citizen of another country, or all of his property may already be sealed by bailiffs.