{"id":3861,"date":"2019-11-11T12:11:49","date_gmt":"2019-11-11T12:11:49","guid":{"rendered":"https:\/\/www.antiersolutions.com\/?p=3861"},"modified":"2019-11-11T12:11:49","modified_gmt":"2019-11-11T12:11:49","slug":"peer-to-peer-lending-revolutionizing-the-lending-paradigm","status":"publish","type":"post","link":"https:\/\/www.antiersolutions.com\/blogs\/peer-to-peer-lending-revolutionizing-the-lending-paradigm\/","title":{"rendered":"Peer-to-Peer Lending: Revolutionizing the Lending Paradigm","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n

The\nconventional monetary system is an outcome of various financial\nevolvements in the past. In early civilization, human beings started\ntransactions in the form of a barter system. There was no currency\nand merchants traded their physical goods, mostly with cattle and\nfood grains. Further, the instances of the quasi-banking method\nallowed for the documentation of banking activities.\n<\/p>\n\n\n\n

Gradually,\ngold and other precious metals became the commodity for exchange and\nstorage. It was in the later period of the 17th<\/sup>\ncentury that banking became financial intermediation between the\nborrowers and the lenders. The traditional functions of conventional\nbanking involve accepting deposits, transfer of funds and lending of\nmoney.<\/p>\n\n\n\n

Indeed,\nthe major obstacle arises for the issuance of loans. The\nfunctionality of banks in performing loan functionality is bizarre.\nAt times, a bank charges up to 25% of the interest from the borrower\nand lends at a minimum of 5%-6%. The balancing is with the banks in\nthe form of profits. Thus this is an alarming situation where banks\nmake profits at the edge of customers. With the bad credit history\nand low credit score, borrowers approach for \u201cpayday loans\u201d. This\nsituation even erodes customers\u2019 faith from the system and\nsubsequently makes borrowers entrapped in the debt circle.\n<\/p>\n\n\n\n

The subprime mortgage financial crisis in 2008 made customers lose their interest in the banking system. Thus, the white paper of Satoshi Nakamoto is the answer to all the failures of the current payment system. Blockchain technology is revolutionizing the ecosystem for the common good of all the parties.<\/p>\n\n\n\n

Peer to Peer Lending Software<\/h4>\n\n\n\n

Peer to peer lending software<\/a><\/strong>, also known as P2P lending software, is the solution for the entire ruckus created by the current loan payment system. The system offers crypto-backed loans and the concept is gaining rapid momentum and acceptance. A P2P lending platform eliminates the paperwork involved in the lending process and allows the borrowers to acquire loans at a lower interest rate. <\/p>\n\n\n\n

On\nthe contrary, in the conventional payment system, borrowers have to\ngo through a long documentation and verification processes. They are\neven charged with an inflated rate of interest on loans.\n<\/p>\n\n\n\n

As\nthe P2P lending process helps overcome the challenges of a\ntraditional lending process, it is rapidly gaining popularity\nworldwide. In this process, a loan is given to the borrower based on\nhis\/her collateralized amount. For example, if LVR (loan to value\nratio) is 50% then it signifies that out of the total collateralized\namount 50% will be regarded as a loan. The loan is secured against\nthe smart-contract-based operating system on the blockchain protocol.\nThe contract can be modified according to the requirements of the\nbuyer. The duration of the contract ranges from days to months or\neven years.\n<\/p>\n\n\n\n

In\nthe negotiation process, neither the credit score nor the history of\nthe loans is checked. Unnecessary documentation or paperwork is\neliminated from the process. Basic identification and verification\nare illustrated on the blockchain and loans are remitted to the\nborrower.<\/p>\n\n\n\n

Indeed, in the situation of the inflationary environment of the country, borrowing from local banks becomes an impossible task. Therefore, crypto loans can serve the purpose in the advanced and secured manner.<\/p>\n\n\n\n

The\nunderlying process of P2P lending platform<\/h4>\n\n\n\n

Peer\nto peer lending software works\nin a similar fashion as of traditional loan banking. Mutual\ncoordination is maintained between the lending platform, borrowers\nand lenders. The borrower has to make an interest payment which may\nbe fixed or floating. Various conditions such as quality of the\ncollateral, tenure of the loan, market conditions and others are\nconsidered in the contract.<\/p>\n\n\n\n

After the principle amount and interest payment are paid, the collateralized cryptocurrency is returned to the borrower. Given the volatile nature of cryptocurrency, there is a mechanism of margin calls. As the value of collateral decreases, the borrower is liable to add further cryptocurrency in the software to maintain the desired balance. Margin calls protect the interest of the lenders from the downside risk. <\/p>\n\n\n\n

P2P\nlending software: What all should be considered?<\/h4>\n\n\n\n

There\nare various checklist items that should be considered before while\ncreating a P2P lending platform.<\/p>\n\n\n\n