Getting started with P2P lending is quite simple & straightforward. Here is all you need to know to start with P2P lending.
Firstly, you need to register with any of the P2P lending platform – check the list here.
Generally, the registration requires a verified mobile number or email id along with KYC documents and banking account details.
The best part to start with P2P lending is that you do not need a Demat account & trading account and there is no hassle of a lot of documentation.
Eligibility to start with P2P lending
If you are an individual –
- You need to be an Indian Resident
- At least 18 years old
- Have a valid Government issued Identity Proof
- Must have a valid Indian Bank Account
Non Resident Indian
- At least 18 years old
- A valid Indian Passport
- A valid Indian Bank Account (NRO Account)
You must be a RBI listed Finance Company or you must be a company formed under the Indian Companies Act
KYC Documentation & Other Details
Once you have completed the registration process, you need to provide your PAN Card, Aadhaar or valid Passport along with a photograph and a cancelled cheque to complete your KYC requirement.
Along with the registration information, you may need to furnish a few other details depending on the platform for e.g. demographic information like age, gender, location etc.
Once you are done with the KYC, you need to link your bank account for transfer of funds for investment or for receiving the EMIs.
Investing on the marketplace
Once your set up is complete, you need to visit the platform marketplace where you can find out the various loan requirements listed. There is a lot of information provided about the loan requirements like loan amount, tenure, need for loan, loan tenure, interest rate, profile of the borrower for e.g. Age, Risk score & grade etc.
A typical marketplace looks like this –
You may also have a look at a live marketplace here.
Once you click on the marketplace, you will get additional details which you might consider for taking a decision on the amount to invest.
As per the RBI guidelines, the maximum outstanding investment in P2P lending can be INR 50 Lacs.
The minimum investment is different for various platforms and can be as low as INR 500.
Diversification & Returns
One of the key elements you need to practise while investing on P2P lending platforms is risk diversification. You must split your investment amount across multiple borrowers, risk categories/grades and profiles like salaried or self-employed.
Suppose the minimum investment on P2P lending platform is Rs 5000, then it would better to invest Rs 15000 and split it into 3 borrowers. You can then monitor the performance over a month to check if the EMIs are being paid. Subsequently you can increase your investment amount.
There is an auto-investment option offered by few platforms like RupeeCircle which you can leverage for re-investing your EMIs according to a criteria.
By leveraging, a combination of diversification & auto investment you can earn a decent double digit return over a shorter term.
The typical returns claimed by P2P lending investors are around 18% to 36% per annum which is much higher as compared to fixed deposits.
To know more, read – How to choose a borrower profile for P2P lending?