Peer-to-Peer Lending in SA

peer to peer lending
Peer-to-Peer Lending in SA

What is Peer to Peer lending or “P2P”?

P2P lending is an alternative option based online, for borrowers and sellers in the lending process that traditionally used banks for the loan process. This progressively favoured option sees borrowers and sellers benefiting far more due to lower fees being charged and better outcomes for both the seller and borrower.

How may you ask? Well, it’s quite simple, these online platforms are actually matching borrowers with their ideal sellers and vice versa. With benefits such as these vs the conventional means of borrowing money, it’s no wonder more and more individuals are going this route.

But is it really a positive alternative?

The answer is twofold, firstly - Yes! This form of lending sees borrowers having access to funds that potentially they would not have access to and saving on costs, as well as lenders who now have an additional channel for investment opportunities. With higher returns, lenders are smiling with this online means of loan approval and process.

The second component of this answer is that there are a few factors that aren’t as advantageous when using the Peer to Peer platform. With most things, if there are only pros, it’s usually too good to be true, and P2P lending is, unfortunately, no exception.

There is a risk when the lender lends to a borrower that might have an undesirable profile. You can’t always be sure who you’re lending to, nor the character of the person when it comes to repayments. Therefore, the risk is always going to be a part of this online platform and probably why insurance is offered in the event of such instances of borrowers defaulting on the loan.

What does the borrower’s get out of P2P?

There are quite a few obvious advantages and some not so obvious that you might be pleased to discover, and might, in fact, assist you in making a decision as to whether to opt for this unconventional yet up and coming route:

  • POTENTIALLY approved loan applications that were declined at traditional financial institutions
  • LOWER interest rates
  • A PROCESS that has more privacy on your transactions
  • TRANSPARENT and better costing fees
  • FREE credit scores
  • FLEXIBLE loan offers

If your interest is peaked, here’s how it works:

In short, it’s an online process offered by an online service team for two parties – the borrower and the seller. It cuts out the middlemen – i.e. banking institutions, and it can basically be broken down into the following steps:

  1. An online platform is available offering peer-to-peer interaction between borrowers and sellers, in such a way that they can find each other by being matched due to certain criteria that are met.
  2. Potential borrowers and sellers each create their own individual accounts onto the above-mentioned platform
  3. Borrowers go about requesting a loan in terms of a financial amount, a specific interest rate they are after and the repayment terms they can offer.
  4. The loan application goes through a thorough screening process before getting approved.
  5. Once approved, the application comes back with a response from a community of lenders that are ideally matched based on accepting the borrower’s laid out terms.
  6. The online team of people then makes it possible for the loan application to begin and be seen through successfully based on basic lending principles and regulations.

A few “borrower” tips to note!

Bear in mind that there is always risk involved where money is concerned - the lending of it especially… so do please heed the following advice when getting on board with a loan application.

With lenders: Do review checks and background checks on lenders to validate their reputation when it comes to lending. Make sure you’re not borrowing from any suspect individuals.

Concerning interest rates: Be sure to compare interest rates that you are being offered by lenders on P2P platforms with the general interest rates that banks might offer. You might assume that due to the nature of P2P being the cheaper alternative that you don’t need to do your homework. But don’t ever fall into that trap.

Fees and charges: There are different platforms for peer to peer lending, don’t take the first one at face value. Look around and try to make a more informed choice when it comes to selecting the platform for your loan.

Regarding security: It’s vital that you ensure security is a priority when it comes to your loan on the P2P platform. Being online is already a security risk, and privacy should be of paramount importance. Make sure that you’re on top of this measure.

Hopefully, this article has answered many of your questions regarding Peer to Peer lending in South Africa. Remember, there are always helpful consultants that you can call on in order to assist you through this process if you have any further queries or reservations. But if not, take the leap and enjoy the advantages of cutting out the middlemen that once firmly held the reigns on all our loan approval opportunities!

Popular & reliable direct lenders offering Personal loans

  1. FNB Personal loan

    FNB

    • Loans up to R360,000
    • Term up to 60 months
    • Interest from 16.25%
  2. WesBank Personal loan

    WesBank

    • Loans up to R300,000
    • Term up to 6 years
    • Interest from 19.25%
  3. Square Finance Personal loan

    Square Finance

    • Loans up to R3,000,000
    • Term up to 10 years
    • Interest from 5%
  4. Capfin Loans Personal loan

    Capfin Loans

    • Loans up to R50,000
    • Term up to 12 months
    • Interest up to 29.25%