Peer to Peer Lending - Explanation and How to Invest
Peer to Peer Lending
Netgenz - Stock | Hello friends, on this occasion we will discuss Investment continuously about So Want, Investment - Indonesia's Popular Investment Type, namely about Peer to Peer Lending - Explanation and How to Invest. Peer-to-peer lending is a supplier of debt services that connects debtors or borrowing factions directly with the owners of debt funds or creditors. Peer-to-peer lending is a form of financial technology or fintech (financial technology). In Indonesia, peer-to-peer lending financial technology is better known as online debit or borrowing. To be clearer regarding the understanding of peer-to-peer lending financial technology, work steps, and advantages and disadvantages, read the article below.
Understanding Peer to Peer Lending
As a form of financial technology, what exactly is peer-to-peer lending? Quoted from Investopedia, peer-to-peer lending is a debt system that directly connects individuals who need debt funds with other people providing the debt. This eliminates the role of conservative financial institutions such as banks as an intermediary faction. Currently, programs or websites that provide online debt or peer-to-peer lending are increasingly being adopted as one of the alternative capital systems.
In Indonesia, the provisions regarding online debt are listed in OJK Regulation Number 77/POJK.01/2016. In this provision, it is explained that peer-to-peer lending is a service of borrowing and borrowing money in rupiah currency directly between creditors or lenders (debtors) and debtors or borrowers (who receive debts) based on information technology.
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Peer to Peer Lending Work Steps
As a debt distribution service, how does peer to peer lending actually work? In essence, peer-to-peer lending financial technology will create an online platform that provides a means for fund owners to pay debts directly to debtors with higher returns.
So, peer to peer lending can be called one of the investment options for those of you who are interested in getting a return greater than the market interest rate. On the other hand, borrowers of funds can apply for credit directly to the owner of the funds with easier and faster requirements than professional financial institutions.
To be clearer regarding the working steps of peer to peer lending are as follows:
- Membership registration. Users (lenders and borrowers) register online via a computer or mobile phone.
- Borrowers apply for loans.
- The P2P lending base analyzes and selects the appropriate borrower to apply for debt, including deciding the level of risk of the borrower.
- The selected borrower will be placed by the P2P lending base in the P2P lending marketplace online and with in-depth information about the profile and risks of the borrower.
- P2P lending investors analyze and select borrowers listed in the P2P lending marketplace prepared by the base.
- P2P lending investors make capital to borrowers that are decided based on P2P lending.
- Borrowers return the same debt according to the agenda of returning debt to the P2P lending basis.
- P2P lending investors receive debt repayment funds from borrowers on a basis.
Profit and Loss Peer to Peer Lending
Just as previously explained, borrowers of funds in peer-to-peer lending services will be charged interest every month. Until, the borrower of funds must pay the basic debt, and interest according to the tenor or the current debt period.
The yield or return for those of you who are interested in investing in peer-to-peer lending comes from the interest on the debt. Before you invest or make capital, it is necessary to take into account the profit and loss of peer to peer lending as reported by Kompas.com below:
The advantage of investing in financial technology lending, namely high returns. Far above inflation, even deposit interest rates. Until the power of money grows enormously.
The returns are given by each financial technology lending company vary. But you can pocket a profit of up to 18% / year. If separated by 12, it means 1.5% /month. The amount of this yield is still within normal limits.
As in the essence of the investment idea, big profits are of course accompanied by high risks. That way, investing in peer-to-peer lending is right for you with an aggressive investment risk profile. Some of the risks that may occur when investing in peer-to-peer lending are the opportunity for the borrower to fail to pay until the borrower experiences a setback or the money is taken away.
Freedom to determine the tenor
Another advantage of investing in financial technology lending is the flexibility to choose a tenor or period. It can be within 6 months, a year, or 2 years.
Investment funds cannot be taken arbitrarily
You as a lender cannot take or take funds in the middle of the road. This means that you can only withdraw investment funds after the investment period is over. P2P Lending companies have their own provisions for disbursing funds. Usually, the tenor of capital or investment that is peddled varies, some are 3 months, 6 months, a year, even more.