When we think of loans, we usually start with the opportunities that financial institutions offer. However, Peer To Peer Lending is something most of us have dealt with at some point in our lives. We call it the “loan” scheme or the “I can see” scheme. You know, “I can see the N500, I’ll get it back tomorrow…”
WHAT ARE PEER-TO-PEER LOANS?
Peer-to-peer (P2P) lending is a method of debt financing that allows individuals to borrow and lend money without using an official financial institution as an intermediary. Peer To Peer Lending takes the middleman out of the process, but it also involves more time, effort, and risk than typical physical lending scenarios. P2P lending is also known as social lending or crowdlending.
Types of P2P Loans
Peer-funded for individuals
This type of P2P loan is usually financed by ordinary individuals and their colleagues. These individuals invest in credit financing and earn profitability based on the interest charged on the loans.
A little different from individually funded credit. They are funded by a group of people, usually high net worth individuals through hedge funds, bank stock funds, etc. Leading investors fund this type of personal loan through peer-to-peer lending platforms.
The main difference between the two types is the amount of money involved. Loans financed by peers in a group borrow more money than loans financed by individuals.
How P2P Loans Work in Nigeria
Although the concept of p2p is well known, the pioneering organizations in Nigeria are quite new. FINT, Farmcrowdy, and Kia Kia are at the forefront of this loan system. These organizations partner with individuals who act as back-end investors while providing these loans to needy beneficiaries.
Peer-to-peer lenders fund their loans in two ways. Some sites will post your application for up to 14 days for potential investors to review. Investors then decide to fund their loan by providing a portion of the total amount requested.
A disadvantage of these types of lenders is that you may have to withdraw a certain percentage of the money. If your application reaches 100 percent funding or the offer term expires — as long as you meet all of the percentage requirements — you can accept or decline the loan. The time to receive the loan depends on how long it takes investors to fund the loan plus the standard processing time, usually a few business days.
The alternative way for P2P companies to fund their loans is to approve their applications and withdraw funds from a group of blind investors, rather than allowing individual investors to review their applications.
In this case, you don’t have to wait for your loan to be funded, as the company decides to fully fund the approved amount, and the time to receive it is simply the time to confirm the information and process. This process usually takes a few business days, although some services offer same-day or next-day deposits if all the paperwork is in order.
Once you have received your money, you will repay the loan in equal monthly installments.
Typically, Peer To Peer Lending maturities range from one to five years, with three or five-year maturities being the most common. Some factors affect the term of your loan, but more often than not, the amount borrowed and the loan ratio weigh more in determining the term.
- Peer Funded (Individual): Peer support is a new type of financing alternative for borrowers and lenders. Peer-funded loans are provided by normal individuals or peers and not by financial institutions.
- Peer-Funded (Group): Similar to individually funded peer loans, many hedge funds, bank endowments, and other major investors fund personal loans through peer or social lending platforms. The difference between individual and group-funded peer-funded loans is usually the amount of money borrowed – groups borrow larger amounts than individuals.
What are the requirements for P2P loans in Nigeria?
The criteria will differ based on the specific organization, but some general requirements are listed below:
- The borrower must be a wage earner
- It must have a national identifier,
- Bank statement of the last 6 months (salary account),
- letter of application,
- A recent energy bill (not older than the last 3 months).
Best Peer To Peer Lending In Nigeria – Where to Get P2P Loans in Nigeria?
Nigeria’s peer-to-peer loan applications bring investors and borrowers together, adding value to both. Here is the leading Peer To Peer Lending site in Nigeria for p2p2 loans:
Surfin – Nigeria P2p Loans for SMEs
SukFin provides SMEs in Nigeria with an easy and free way to find financing for their business. They use technology and their experience to match SMEs with various lenders across Nigeria. Applying for a p2p loan from SurFin for your company is easy if you provide the requested information.
Surfin needs you to answer questions like how much money do you need and what is it for? if they are happy with your profile, they will agree with your creditors and your loan application will be approved and your business will be financed.
Surfin works with several lenders in the corporate finance market in Nigeria. They helped their clients find unsecured loans, invoice financing, equipment leasing, startup loans, and more.
Kiakia is a popular loan app in Nigeria. It is a peer to peer lending application that allows users to earn higher returns on their inactive funds while extending credit to the people who need them.
Kiakia’s app allows any Nigerian (investor) over the age of 18 with legitimate sources of income to provide funds to fund MSME Secured Loans
This allows lenders (investors) to earn monthly, quarterly, semi-annual, and annual returns while offering beneficial stock deals that can help them grow.
With Kiakia, Lenders can choose the sector or sector in which they want to offer their money as a loan. º
KiaKia was launched in 2016, allowing people with just N50,000 to now invest in loans and contribute money to qualified borrowers and earn returns on their money. Loan packages for investors are between N50,000 and N10,000,000.
Kiakia also has a halal option, where Muslims can participate in allowed earnings. This halal option is in line with Islamic principles for interest-free financing. Therefore, when KiaKia finances companies under this Halal package, it is for-profit sharing and not for interest payments.
Kiakia has a security fund where, if a debtor does not pay, the investor/financier is compensated by the security fund.
Interest rates on the Kiakia application range from 12% to 40% and run for 6 to 18 months from the term of the loan. Interest/income payment options for investors are – 3 months, 6 months, 12 months, and 18 months, payments are credited automatically. Learn how you can get Kiakia loan here.
FINT is an online peer-to-peer lending site in Nigeria established in early 2017.
FINT allows investors to subscribe to its platform, find their accounts, and fund loan applications from a group of anonymous borrowers. While loan seekers can apply and apply for loans. Borrowers in FINT are selected using algorithms.
FINT aims to make loans more affordable and affordable for Nigerians through peer-to-peer lending. So, they have the option of borrowing directly from banks or online loan applications in Nigeria.
Investors can earn returns of up to 39% on FINT.
At FINT, lenders can also choose the objectives or sectors in which they want to use their money.
Benefits of P2P Loans
Peer-to-peer loans in Nigeria are not always better than loans from a bank or credit union, but they have some unique features that make them competitive.
Low costs: With P2P loans you can often borrow at relatively low rates. You only have to pay enough interest to satisfy your creditor – and most of the interest you pay goes straight to your creditor.
To ensure that your loan is funded by a P2P lender, expect to pay an early start-up fee of 1% to 5% of your loan amount.
Compared to a personal loan from a bank, these costs can be high. On the other hand, they can be lower compared to a second mortgage (and the process is easier). Of course, there are additional costs for things like late payments.
The next time you need an instant loan, consider a p2p loan as an option, based on some of the benefits discussed, it can be a viable option to meet your needs.