Borrower's profile on P2P lending sites

P2P in a nutshell

Peer to peer loans facilitate a hassle-free and mutually beneficial transaction between two parties – low interest rates while borrowing, and greater returns while lending through loans without collateral.

P2P loans are in fact easier to source and are a better option compared to banks and other financial institutions. Members must meet the strict eligibility criteria and verification norms in order to be able to request or lend money. All one needs to do is to register, get verified and start creating loan listings.

Case in Point: You have successfully registered on a P2P lending site and are ready to reach out to borrowers who are in need of cheaper loans and on a short-term basis. How would you analyze a borrower's creditworthiness, repaying capability? Below are a few points to help you find right answers.

Knowing your Borrower

Though borrowers are only allowed to request loans after having met the verification norms, it is always advisable to thoroughly understand their financial capabilities, creditworthiness and their ability to repay. This could be done by going through their profile where you will find all details relating to employment, income, expenses, credit history and more.

Remember, any borrower will request a loan that only he/she could repay. Always choose someone with good credit history and who is willing to pay decent interest for any requested loan amount. Following are a few details you should consider and analyze well before taking a decision:

Who, Where and What

Employment information such as designation, tenure, nature of job, industry and company name always goes a long way in ensuring whether or not you're dealing with a creditworthy individual. A salaried professional always will have planned his/her repayment and these details will help you further in assuring yourself for a safe transaction.

Know the Numbers

Loans requested, taken and repaid are basis of a borrower's income and expenses. By knowing the amount of money a borrower makes or earns, you will get a clear picture of his/her financial capability. An individual with stable income would always make a better choice. Furthermore, it is good to note their expenses and to what extent they are being made. Analyze for yourself, can they repay you back? The disposable income is your answer!

Deal-maker or Deal-breaker

Credit history, the very definition of it is someone's ability to obtain something even before a payment is made, purely on basis of trust. On a brighter side, individuals who repay promptly, score high on the rating and the ones who do not, obviously, get bad grades. By understanding credit history of an individual, you'll know how indebted a borrower is and if the income is enough to sustain the expenses and payment that is owed. An obligation from the past, wherein a borrower was responsible for paying back the borrowed money and have done so, would always help you make a sound judgement.

To each his own

You may also choose to invest or lend money to borrowers with specific requirements. For example, you may wish to lend money only to some who have made a loan request for 'Debt Consolidation', and similarly, for 'Skill Enhancement', 'Home Improvement' etc. This is in fact your window to reach out to a targeted set of individuals who have requested money for a special purpose. However, it differs from lender to lender as some might want to reach out to anyone as long as their credit history is pretty good and is willing to pay back.