Starting a new business is a challenging task and more so due to the presence of cut-throat competition in the business world. Funds and budget are other major elements which play a decisive role in starting a new venture. But with the availability of loans, the stress can be eased out to a great limit. Gone are the days when people had to visit the bank for financial requirements. Now things have gone digital and facilities can be arranged with a tap or click of a finger. P2P lending app is becoming increasingly popular in the business. A peek into the same will give a better understanding of the concept which has taken the business world by storm.
What Is The Peer-To-Peer Lending App (aka loan app)?
Peer-to-Peer lending is also known as the P2P lending app or website. It is a service that brings money lenders and borrowers together through an online medium. In short, it connects money lenders with money borrowers. It is direct communication between the moneylender and the borrower without the intervention of a financial organization or institution like a bank. Such websites have come forth as a great alternative to banking and other financial facility providers. It is conveniently termed as a Loan App also.
How P2P Works?
The websites offered such services have to set rates of interest and terms/conditions of the facility. Most of the sites offering such services have a wide and diverse range of interests that are offered to the users based on their credit score.
• The borrower can create an account in such a site by depositing some money which can be dispersed as a loan.
• The loan seeker will post the requirement and assign the willing rate of interest he/she is determined to pay in lieu of the loan.
• Offers can be reviewed by the applicant subsequently allowing him/her to accept the offer.
• The money is transferred in their account and monthly payment can be handled through the website.
P2P Lending App Advantages And Disadvantages
Every coin has two sides with this being no exception. Let us study the pros and cons of the P2P lending platform.
• It is not an expensive affair: The fact that such services offered through a financial institution mean shelling out a huge sum of money as fees deter applicants from approaching the banks. Through the online carrier, the same process is processed at minimal fees and the need for physical presence is also eliminated. The entire process is online and hence the convenient quotient is very high. The applicant can avail the facility sitting at the comfort of their home or workplace. No deposits or guarantors are required to undergo the procedure.
• The terms are conditions are set by both the parties (borrowers and seekers): Factors like rate of interest, monthly payment, and deadline can be conveniently decided by the borrower and the loan seeker. They can decide the terms which are acceptable to both parties. However, the applicant cannot apply for a new loan until the previous one has been paid off. The borrower can fill several points as clauses that the borrower needs to abide with.
• Inspection of the applicant is important: The borrower should be sure about the applicant’s status. Hence the applicant should upload documents and scanned copies of IDs like passport, tax identification number, etc. so that credibility can be attached to the application. They even need to provide their income status which will act as an important decisive factor for the borrower to accept the application for the loan. The credit score of the applicant will be inspected and based on the credit report, the borrower can take a decision.
• Rate of Interest is minimal: As the services offered are through an online platform, the overhead costs of running a financial institution are absent. Thus the carrier can offer a low rate of interest on the loan which acts as a catalyst in attracting the attention of loan seekers.
• The insecurity of payments is high: The borrower can default in making timely payments and hence the process is highly insecure in this format. Sometimes debt collectors are also added in the process which can make the picture ugly. The collectors have to physically visit the borrower to convince them to make the payment with a stern stand.
• The loan amount cannot be high: As the entire system is based on mutual trust and no physical interaction, the loan amount is also not very high. This means that the borrower will still have to visit the financial institution if he/she/company requires a loan with a higher amount.
How To Create a Loan App: What To Start With?
Businesses interesting in the creation of their P2P app should understand the following points:
• Registration form is a must: Registration of the company following legal terms in important. This is an important step that even the websites need to follow.
• Register or give a name to the website/application: The creation of the loan application can be successful if the person adheres to government laws and follows the legal route to create the app. Check the name which you give to the firm as it should not be copyrighted as it would be accepted otherwise. Brand name and domain names should differ. Domain registration comes attached with a fee.
• Initial investment: Funds are required to be spent on the development of the app. The loan can be sought for such investments as well as it will attract investors. Rising of initial capital is an important step which also adds credibility to the establishment.
• Keep the UX design of the app simple and easy to understand: Make the interface of the application user-centric enriched with important features so that users can easily navigate through the website and the application. Visitors like to stick on to the applications which are easy to understand. All Call to Action buttons must be clearly visible and easy to understand for the users.
• Software development for the desired platform: The P2P website is designed with the motive to attract users through trust. The mobile application will be designed for the iOS or Android platforms. The app should be quickly accessible to users.
Also Read: Planning to Integrate Artificial Intelligence in mobile app development? Know the Pros and Cons!
Important Aspects To Consider During The P2P App Development
The designing and development of P2P app come wrapped with specific factors which should be avoided:
• Lawyer is required: Every business entity requires the help of a lawyer for proper establishment. Legal issues will be handled by the expert. The initial paperwork for the establishment of the company can also be handled efficiently by the lawyer.
• Financial specialists should be hired: Financial experts are required to review the policies, terms, and conditions required for the proposals in the lending segment. The P2P application can be effectively designed with the help of their guidance.
• Making a loan agreement: The company should be able to involve money lenders only after having proper agreements with them. The agreement should also exist between the lender and the seeker for the loan.
• A banking partner is required: For all the monetary settlements, the intervention of a banking institution is important. The bank will keep the money of the investors which will be circulated as a loan to the borrowers. One or more banks can be partnered with the procedure.
• Make the app region-friendly: If the intention is to create an app that can target consumers across geographical locations, then complying with the legalities of the specific area is important.
• Multiple integrations are required: Payment gateways, wallets, bankers, etc. should be integrated into the application.
Legal Compliance And Encryption
The app should be designed with security elements so that hacking is rare. Employing certain security tools for the application can be a beneficial act. Users are recommended to have encrypted authorization using PIN codes, passwords, etc. Local policies and regulations should also be taken into account while the application is designed.
How To Promote Your P2P Lending App
A ready application requires promotion so that users are aware of its existence and use the same. Involve media for the promotion of the app. Press can be a good tool to spread the word about its launch. Targeting the right audience can always yield beneficial results.
Social media is the latest and the trendiest way to engage customers. It is also the fastest and most interactive method to reach the target audience. As the results are quick, the feedback is also quick. Hence the app can be easily launched and results are clear.
Take-away: There are several ways to promote the application but the designing process remains the same. Challenges exist in every field and this is no exception. The service providers can prove to be highly beneficial in the creation and the development stage of the application.