White label P2P lending is common, like traditional bank loans. But what is a P2P lending platform, and why is it so popular? Let’s look at this in the article.
What is P2P?
White label P2P lending (P2P lending software) is a format of financial relationships in which the lender and the borrower agree without the participation of banking institutions. P2P — is lending through special online platforms. The platform is an intermediary but not a guarantor or equivalent participant in a mutual loan agreement.
As a rule, the contract is kept in electronic form. It is equivalent to the usually written commitment taken from the borrower. If they fail to fulfill the terms of the contract, the creditor or an individual has the right to apply to the court for compulsory debt collection.
Who Uses P2P Services?
It is crucial to note that in 95% of cases, private investors are engaged in a P2P lending platform. And the borrowers are individuals who, for some reason, cannot take a loan from a bank (or they are not satisfied with the conditions proposed by a financial institution).
It is quite possible that the person to whom banks simply refuse to apply for a consumer loan due to a low credit rating or the presence of overdue debts. That is, the risk of avoiding payments is high. Therefore, in a P2P lending platform (lending software), interest rates and conditions are usually less favorable than those offered by local banks. Business representatives participate in the P2P lending platform as borrowers. And mostly, these companies are related to the IT segment. Also, people often use white label crowdfunding to create a new startup or to buy real estate.
Why Is P2P On-Demand?
But the P2P lending platform (lending software) has advantages for both investors and borrowers:
- The opportunity to invest your assets and gain profits (the profit on peer lending is higher than if you use bank deposits);
- P2P lending platform monitors the fulfillment of the financial obligations (although they have no guarantee in the legal sense).
- For the borrower, the P2P lending platform or the lending software is an opportunity to get the best lending solution taking credit history and financial obligations into consideration.
What Are the Risks?
Let’s do the risk assessment. All the risks are on the lender, and P2P platform or P2P lending software is needed to prepare the loan agreement. The borrower is responsible only for legislative regulations. But if he/she does not pay the debt, it turns out that he/she does not have any property. Then only a private investor will suffer financial losses. In this situation, the most suitable position is to be the owner of one of these websites, keeping the management and administration processes of the platform.
It is also necessary to consider that the creditor is obliged to pay income tax from the income received and mention this information in the declaration submitted to the tax inspectors.
In case of a trial between the lender and the borrower, all costs are paid by the one who applied to the court. This process can take up to 6 months. During this period, the validity of the loan agreement is suspended (until a court announces its decision).
How Is It Possible to Reduce Risks?
- Evaluate the online service and the site in advance for its objectivity before signing a contract.
- Carefully check potential borrowers and feedbacks.
- Enable the option of insurance in case of non-return.
- Risk assessment: calculate the additional costs in advance to consider whether such an investment is profitable.
Advantages and Disadvantages to Consider
- A relatively low sum is needed to enter the site as an investor (400 USD to 600 USD).
- The contract is executed remotely.
- The terms of cooperation for both the lender and the borrower are more favorable than any bank can offer.
- The website has a lack of responsibility. This disadvantage is crucial for a participant, not for the website. The investor has to protect interests in case of disputes.
P2P lending platform or P2P lending software is a financial relationship where the contract parties determine the terms without third-party assistance (including banks). This solution is a relatively new sphere in the investing industry, but it is extremely promising due to its advantages.
ICODA and a White Label Solution for Businesses
If you are interested in the idea of a P2P lending platform, ICODA is ready to help you bring your idea to life. It is important to say that this type of this platform does not need a large team of employees to control it, but at the same time, it is very profitable.
At the moment, the sphere of lending business of this kind (lending market) is not yet overflowing, and you will be able to find your customers.
Our ICODA team of experts has extensive experience in software development and creating platforms of this type. We are ready to provide top-notch services and the final product of the highest quality. You can contact our team right now and find out all the details.