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Alternative Investments: P2P, understanding borrowers profiles

Alternative investments are gaining popularity in India (and across the globe) with busy professionals. Many look to build a passive income and discover P2P is a great option. P2P lending facilitates a direct transaction between individuals in need of credit and those willing to lend from their surplus funds.
October 27, 2023

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Alternative investments are gaining popularity in India (and across the globe) with busy professionals. Many look to build a passive income and discover P2P is a great option. P2P lending facilitates a direct transaction between individuals in need of credit and those willing to lend from their surplus funds.


Lenders are always concerned about the risk of default. Find out the due diligence Faircent.com undertakes to mitigate this risk. It’s the reason why we selected them as our P2P partner.

How Faircent.com Does It

The Faircent.com rule engine is an in-house algorithm. It assigns different weightages to various factors to compute a score that helps understand a borrower’s risk profile. It is this risk profile that determines the interest rate, loan tenure and amount at which the borrower’s loan request can be listed on the platform to secure funding from the lenders. Interest rates are directly proportional to the risk profile. For example, loans listed at high-interest rates indicate a high-risk profile while lower interest rates mean lower risk. You can consult a Cube Wealth Coach or download the Cube Wealth App.


Various factors are considered by Faircent.com’s fully automated credit evaluation mechanism to determine a borrower’s risk profile.


Ability of the borrower to repay the loan: This is understood through a detailed study of the borrower’s income & expenditure behaviour. It is gauged through their banking habits. A healthy percentage of income saved, and lower debt ratio reflects better ability of the borrower to repay his/her financial liabilities.


Stability of the borrower to repay the loan in a timely manner: It refers to the stability in borrowers personal and financial status that supports his/her loan repayments. Criteria assessed is the nature of borrower’s residence i.e. rented/self-owned, length of stay at the same address, length of employment in the same organization etc.


Intention:
A borrower may have the ability and the stability to repay their loan in a timely manner, however intentionally default due to habit or lack of financial discipline. The intention is understood by analysing the past repayment behaviour of the borrower towards their financial liabilities. Delayed repayments in past financial transactions reduce the chance of loan approval.


More:
Other than analysis of financial, credit and personal data, Faircent.com also undertakes telephonic verification to get first-hand information from the borrowers as well as physical verification at both their residence & office address. All documents submitted by the borrower are also verified for forgery using state-of-the-art technology. This data is made available on the borrower profile for lender perusal.

Summary

Alternative investments offer attractive returns for busy professionals and offer passive income options. With P2P, lenders often feel that investing in borrowers with high-interest rates will lead to high returns. That’s is not necessarily true as high-interest rates also indicate a higher possibility of default – counter-productive to providing a passive income.


A smart investor takes full advantage of the partnership between Cube Wealth and Faircent.com and skips all of this worry. They simply select their risk category and a custom P2P portfolio hand-picked for them. Investors get the full expertise and comfort of the Faircent.com borrower assessment without doing any of the work themselves. You can consult a Cube Wealth Coach or download the Cube Wealth App.

FAQs 

1. How do P2P lending platforms assess borrowers' profiles?

Ans. P2P lending platforms typically assess borrowers' profiles by considering various factors such as credit history, credit score, income, employment status, and loan purpose. They may use proprietary algorithms and data analytics to determine creditworthiness.

2. What are the risks associated with investing in P2P lending?

Ans. Risks in P2P lending include the potential for borrowers to default on loans, platform risk, lack of collateral, and liquidity risk. Investors should carefully evaluate their risk tolerance and diversify their P2P lending portfolio.

3. How can I diversify my P2P lending investments?

Ans. Diversification in P2P lending involves spreading your investments across multiple loans to reduce risk. P2P platforms often allow investors to lend small amounts to a variety of borrowers, achieving diversification.

4. Are P2P lending investments regulated?

Ans. Regulations governing P2P lending vary by country. Some regions have established regulatory frameworks to protect investors, while others have limited oversight. It's important for investors to be aware of the regulatory environment in their jurisdiction.

Conclusion 

In conclusion, P2P lending offers investors an opportunity to earn returns through lending, but it also comes with associated risks. By understanding how P2P lending platforms assess borrowers and by diversifying their lending portfolios, investors can make informed decisions that align with their financial goals and risk tolerance. It's important to stay informed about the ever-evolving landscape of P2P lending and be aware of the regulatory environment in your area.


It’s the smartest way to manage your P2P portfolio and experience the high returns of an alternative investment. It’s exactly what every busy professional wants. Book a free call with your personal wealth coach today or read more about P2P lending via Cube Wealth here.

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