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Peer to peer lending (P2P) is a way for people to lend money to individuals or businesses. You – as the lender – receive interest and you get your money back when the loan is repaid.
It can be used by anyone with a good credit score and a responsible borrower.
It also allows small businesses to borrow money from investors for easy access to capital, which can be a more affordable option than going through traditional banks that often give ask for collateral and high-interest rates.
Small businesses can get access to the capital without having the rigorous process of applying for a bank loan that usually requires collateral and a guarantor to lessen the risk of banks.
In fact, this industry has expected growth at an annual rate of 25% for the next five years. This is the reason why this industry is considered to be one of the fastest-growing industries in the world.
But, the real question is how does it really work, and why Peer to Peer lending is different from a traditional bank loan?
Well, this new type of lending has emerged in recent years. It’s different than traditional borrowing because instead of borrowing from a bank or other financial institution, you’re borrowing from people who are willing to lend to you for corresponding interest rates.
The basic idea behind peer-to-peer lending is that it can provide more money to borrowers and better rates for lenders.
Platforms provide a venue where lenders and borrowers connect directly and the money only goes through one middleman: the website which facilitates the transaction.
The assessment and credit worthiness of a borrower is already handled by the platform making sure that the risks are properly studied and giving the investors better information whether they want to invest in the loan applied by the borrower.
Luckily, there are lots of local peer to peer lenders available here in the Philippines. We will get more of that later.
For now, let’s discuss the different pros and cons of Peer-to-peer lending:
Pros Of Peer-to-Peer Lending
Cons Of Peer-to-Peer Lending
Now that you have the idea of why there are advantages and disadvantages of Peer-to-peer lending, let’s now discuss the Peer to peer lending platforms available in the Philippines.
01 of 07Vidalia Lending
This is a peer to peer lending company under the list of registered organizations on the SEC website. Meaning, it works under the law and passed all the necessary inspections of the supervisory authority of the country. Vidalia Lending can be trusted and allows people to enter the company aged 21 – 40.
Vidalia Lending is recognized for its cooperation with a lot of experienced investors. They have extensive experience in the financial and economic sectors of the country.
No wonder why they operate through US Securities and Exchange Commission (SEC). Vidalia Lending also provides loans and investments with fixed regular payments, 2 months to 1-year terms, and no hidden charges. You can loan money with Vidalia in just 3 easy steps.
- First is you have to apply for an account and fill out all the necessary information they need. The information you have to provide consist of Name, Present Address, Loan Amount, purpose of the loan, Company name, and your current monthly salary.
- Once Vidalia Lending approved your application, they will contact you to discuss the required documents you need to have.
- Lastly, Vidalia and you – as the borrower, will discuss the terms, then you will sign the contract agreements of the loan, and how you will be going to repay it.
Many borrowers are fond of Vidalia because they review loan applications right away after applying.
They’ve been an operating company since 2008 and were able to collect a lot of positive feedback from the customers. Aside from getting money quickly, the interest of the loan is only minimal.
So if you want Vidalia Lending to be your lender, start joining their company today!
When it comes to investments, I think the earnings offered by this company are extraordinary. Because not just they offer a 4% return, but the payment terms can be daily, weekly, semi-monthly, or monthly.
You just have to open an account with a minimum transfer of PHP 5,000. After that, you’ll receive an email confirmation saying that your account has been activated. Now, you are ready to invest your capital.
02 of 07Kiva Philippines
Kiva is created by a lot of people all over the world. Their loans are for everyone who wants to fulfill their own needs or open up a small business. Kiva is often assumed as a charitable organization – but they don’t. The contribution of $25 everyone can give, will be a returner with numerous benefits.
This lending company exists in more than 80 countries and has 80 billion users. Aside from issuing loans, you can also choose your preferred area on where to make a contribution.
When you visit the website of Kiva, you will immediately see some of the profiles of its members. There you can choose to lend your money to them or become one of the borrowers as well.
The current amount funded through Kiva is $426, 975 or almost 22 million pesos.
How Kiva works for borrowers?
- The borrower applies for a loan.
- The loan goes through approval and underwriting processes.
- The loan is posted to Kiva’s website so lenders can support it.
- The lenders can crowdfund the loan with a minimum of $25.
- Once the posted loan is accomplished, the fundraising is completed and the borrower now needs to repay the loan in terms of the agreement.
- The lenders use these repayments to fund new posted loans – but they can also just donate or withdraw the money.
How Kiva works for investors?
- In Kiva, you can be a lender as the same time of being an investor.
- You’ll choose the loan you want to fund and understand its terms and conditions.
- You wait until the loan is fully funded and the borrower is ready to repay.
- You can repeat the same process or just withdraw your money.
03 of 07SeedIn
SeedIn is recognized as Southeast Asia’s largest business financing platform for peer to peer lending. The company was launched last 2014 and connects local entrepreneurs that want short-term financing for their businesses or need personal loans.
Since SeedIn was launched, they were able to facilitate PHP 10 billion amount of funds.
SeedIn is considered as loan borrower-friendly because:
- Loans can get approved in a span of 1 week.
- Approval is based on the growth and potential of business.
- SeedIn have a lot of dedicated client advisors.
- Offers flexible financing options.
- Has fixed interest rate and no hidden charges.
SeedIn is considered investor-friendly because:
- Only 1-12 months of tenure, unlike other financial intermediaries with minimum of 6 years lock-in period.
- Offer an annual return of 10%.
- There’s a monthly payout of interest.
- You can invest for as low as PHP 1,000.
- You’ll be of help to improve local businesses in the country and provide the growth of their capital.
How does SeedIn work for investors?
- Register to SeedIn PH.
- Top up or put money on your account.
- Select a project you want to invest.
- Once the project is successful, your funds will be placed on hold until the subscription of the borrower is being completed.
- After the project is closed, the borrower is now on the repayment period and this is where you can get your monthly payouts according to the contract terms.
04 of 07Blend.PH Loan
This peer to peer lending platform is a pioneer in the industry. Blend.PH loan is managed by inclusive Financial Technologies was founded in the year 2016.
Blend.PH platform connects lenders who want to grow their investments and diversify portfolios through borrowers who are in need of personal or business funds.
Blend.PH Loan features for borrowers:
|Type of loans||Interest||Amount|
|Fast||8% per month||PHP 10,000 to PHP 40,000|
|Personal||Depending on the risk type||PHP 50,000 to PHP 2,000,000|
|Seafarer||3.5% per month||PHP 50,000 to PHP 500,000|
|Franchise||2% per month||PHP 50,000 to PHP 2,000,000|
|Salary||3% per month||Equivalent to 1 month salary|
How to get a loan on the platform?
- First is you have to register here and create an account. Just fill in all the required information needed.
- Submit all the requirements necessary so your loan application can get evaluated and verified by their agent.
- After approval, your loan can now be auctioned on their website and lenders can now fund it.
- Once funded, you’ll receive the proceeds right away.
For investors, Blend.PH Loan offers interest earnings of 6% to 30% annually for a minimum investment of PHP 5,000.
How to invest in Blend.PH?
- Create and register to your Blend.PH lender account.
- Top up or fund your wallet. You can do this by depositing money through their bank account number because they will require you to upload a proof of payment to proceed.
- Once that your account is verified and approved, you can now invest your money on Blend.PH.
05 of 07Acudeen
If you are a lender at Acudeen, you have the opportunity to fund some invoices to small businesses that have opportunities to grow their cash flow.
Most of the borrowers are SME’s that lacks the capital to fulfill and deliver good procured to them by large and big corporations who usually demand 30 to 120 days before they received payment.
It’s a way for businesses to sell their invoices at a discount, and it’s also a way for businesses to buy invoices from other companies.
To understand fully how this works, you can watch the video below.
All the invoices that can be bid on Acudeen’s online marketplace are verified. And according to Acudeen, the typical return on investment their investors get can vary from 15% to 25% annually.
If you want to be a funder on Acudeen, just follow these 3 simple steps.
- Fill out their application form that can be found on Acudeen’s website, after submitting, you have to confirm your email address.
- It is also necessary that you complete their “Know Your Customer” requirements so Acudeen will be able to verify if you are a corporate or individual funder.
- The most crucial thing about Peer-to-peer lending is you need at least PHP 1 million on your e-wallet in order to activate your account.
When it comes to getting funding or selling your invoice on Acudeen, follow these steps.
- Fill out their seller’s application form and complete “Know Your Customer” requirements.
- Upload the copy of your invoice and get cash in just a matter of 5 days.
Since Acudeen is a technology company that enables small to medium enterprises (SMEs) to finance their receivables ahead of time, your business will be safe from negative inventories and a bad flow of cash.
Their online platform allows the transactions to be fast, reliable, and safe too.
06 of 07FAQs
1. What problem does peer to peer lending solve?
The peer to peer lending industry has been expanding rapidly over the last few years because it offers borrowers the opportunity to get lower rates and quicker access to capital, while it offers investors the opportunity to earn higher returns than they would through traditional savings accounts.
Peer to peer lending is a legal form of lending where people can borrow and lend money without the involvement of banks.
Although, the legality of peer to peer lending still varies by country. For example, in the Philippines, peer-to-peer lending is legal.
However, in India, it is illegal to lend money without a bank or financial institution being involved in the transaction.
3. How do peer to peer lending platforms make money?
Peer-to-peer lending companies make money by charging borrowers an origination fee and investors a service charge or interest rate.
The company makes money from the difference between the interest rates they charge borrowers and the interest rates they pay to investors.
4. What will happen in case there’s a default of contract?
The average default rate in Peer to peer lending is 2-7%. If the borrower defaults on the contract, in many cases, the latter is no longer entitled to transact on that same platform.
Whereas, the money of the lender will be unpaid. This is why every lender/investor should take into consideration the risk and credit profile of the borrowers.
5. What are the risks of peer to peer lending?
Aside from borrower default risk to lenders, peer-to-peer lending is still in its infancy stage and there are many risks associated with it. These risks include fraud, high-interest rates, and difficulty in getting loans approved by lenders.
Just like any investment, there’s always a risk involved and only invest that you can accept or totally lost it.
07 of 07Conclusion
Peer to peer lending is an industry that has grown exponentially over the past decade. As it continues to grow, it will be an increasingly important source of credit for consumers and small businesses.
The emergence of peer-to-peer lending is a result of the growing dissatisfaction with traditional banks and their high-interest rates.
Peer to peer lending platforms offers more competitive interest rates and lower fees for borrowers, which can be attractive for people who are looking for loans or infuse fresh capital.
Read more: Increase your BPI Withdrawal Limit Up to Php 100,000
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