Are you looking forward to registering on a Peer to Peer lending platform? There are several aspects you should consider. Below are the questions investors should ask about the P2P lending platform before investing their money in it.
1. Does the Peer to Peer Lending Platform Have a License?
The number one question you must ask to the Peer to Peer lending platform’s administrators is whether it has a license? A licensed P2P lending platform must work according to the specific guidelines of Financial Conduct Authority (FCA) relating to information security, provision of information, forwarding borrower details to credit information institutions and applying several parameters. Checking the P2P lending platform license is the best method for lenders to determine the legality. Among the UK’s Peer to Peer companies providing loans, those with licenses are considered safe for investment.
2. What is the Number of Borrowers on the Platform?
Investors need to find out about the number of borrowers on the platform listing, and the number of loans they have granted.
Suppose the overall amount is low, then the possibility is that you will not connect with any borrower for a long time. The experts advise investors to enquire about these aspects in detail from the Peer to Peer lending platform before joining it.
3. What is the rate for defaults? What Measures are Taken to Manage the Delay or Default?
Every P2P website must show its performance indicators to consumers for keeping its transactions transparent. But, many Peer to Peer lending platforms do not provide complete information relating to their successful transactions on the website. Investors have all the privileges to enquire about these necessary facts. So they can base their decisions on that.
Investors should be informed about how focused the platform is on preventing delays in repayments. What measures do they take to receive any due payments, and what is the strategy to recover investments when the default occurs.
The investors should also enquire about the data relating to the last twelve month’s transactions. Experts advise that investors must be informed about the collection and recovery strategies of the Peer to Peer lending UK platform. They should receive updates about the entire process and all the activities they undertake to collect the cash. Be up to date with the whole legal proceeding and how helpful it is in obtaining the money.
4. How Much Profit Can I Receive?
Your profits rely on the financial status and risk profile of the borrowers on the platform. Investors must try to determine different risk classifications to determine the possible returns they can receive from the platform.
Investors should remember that greater average ROI also means greater risk and could represent subprime borrower presence. One of the methods to decrease the risk is diversification by investing in several loans of different risk categories.
5. What type of information is shown about the borrower profile and your credit assessment process?
The Peer to Peer lending platform might or might not show details relating to the borrower’s name, location and occupation. As an investor, you have the privilege to find out about this information. You can enquire about it if it is not on their website. Moreover, a decent credit assessment software running on the platform can make sure there is a high ROI.
The borrower’s disapproval rate, on-boarding prerequisites, necessary documents, underwriting quality provide details about the borrower’s background and how reliable they are for granting loans.
Conclusion
If you want to register on the Peer to Peer lending platform as an investor, there are plenty of aspects you should remember. We have discussed various questions about the P2P lending platforms that you can inquire about before investing your money in it. First, you must find out whether the P2P platform has a license. Also, you should know what is the number of borrowers on the platform? So, you can have an idea about the transactions occurring on the platform to find out about the profits you can earn. Then you can enquire what is the default rate and what measures are taken to prevent the delays in repayments and make collections? Also, you can ask how much profit you can receive? And in the end, you can inquire what type of information is shown about the borrower profile and what is the credit assessment process?
