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Blockchain is disrupting the overall financial market with its power to revolutionize the industries. Lending platforms are also positively embracing blockchain. Blockchainis all set to reconstruct the lending model by bringing more transparency and trust in the system.
The traditional banking sector lending process includes third-party involvement. Middlemen such as loan officers, banks, underwriters or loan processors build the trust between the borrowers and the lenders and thus charge a huge amount of fees for the same.
The approval of a loan or credit also takes a couple of weeks to process. There is also a huge difference in the rate of interest offered by these banks worldwide. For instance, countries like the United States and Algeria process loans at a rate of 4.8% and 8% respectively. On the other hand, Bangladesh lends a loan at an interest rate as high as 31.2%.
The integration of blockchain in peer to peer lending is revolutionizing the whole ecosystem. It removes the intermediaries from the system and hence makes the system more efficient. Following are the main attributes of peer to peer lending software development:
P2P crypto lending software connects both borrowers and lenders across the globe on a decentralized platform. Let’s further discuss which are the different parties involved in the process of P2P lending.
Step 1: Lender creates his profile
Firstly, the lender creates his profile and confirms that he is willing to credit the amount to potential borrowers. The lender usually mentions the following aspects in his profile:
The profile of the lender is updated in the market place so that both borrower and lender could find each other.
Step 2: Borrower creates an account
Similarly, the borrower creates his account by providing the following information:
Step 3: Borrower sends a request for the loan in the system
After the account of the borrower has been created successfully, he can send the credit request in the system which will be shown globally on the peer to peer lending software.
Step 4: Order processing in the matching engine
As soon as the borrow order is put by the borrower on the platform, the matching engine starts its processing. It processes all its profiles and suitably matches the borrower with an appropriate lender. Hence, the loan is fully matched.
Step 5: Approval of the loan
The loan is approved by the matching engine by checking the essential collateral requirement inserted by the borrower. Therefore, the loan amount is transferred to the borrower’s wallet.
Step 6: Loan repayment
The loan amount is repaid by the borrower. In case the borrower fails to repay the loan amount, then his collateral will be sold out in the open market.
This is how the P2P lending process works for the crypto market. This revolutionized model is sure to help in reducing delays, making quick approvals, eliminating the need for middlemen and bringing in more transparency.
The new lending marketplace is expected to reach a value of $290 billion by the year 2020. If you are also looking for building your P2P lending platform then associate with an experienced P2P crypto lending software development company like us to navigate your development journey. We offer a white label P2P lending platform to expedite the deployment process.
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