Blockchain P2P Lending Platform | Revolutionizing Lending

Published : Sep 16, 2020

  • Investors want to make money on any asset. In this digital age, not only fiat but also cryptocurrency development can also make lucrative business solutions. Investors can explore the development of the P2P lending platform with blockchain and cryptocurrency solutions, if they are not satisfied with lower returns with principal amounts in banks.

    Borrowers with poor credit scores for justifiable causes can collect money directly from investors with a Blockchain-powered P2P lending platform. The emerging age gears towards direct transactions with digital smart contracts and blockchain technology. Now, let us take a look at how to stamp your footprints in the business by launching these ideologies in blockchain-based P2P Lending Software Development. 

    Blockchain P2P Lending Platform | Benefits

    • International Scope
    • No additional resources to maintain documentation
    • Cuts additional fees in Peer-to-Peer lending 
    • Quicker than traditional loaning methods 
    • Fixed interest rate 
    • Minimize middleman requirement 
    • Reduce time and get approvals quickly 
    • Enhances transparency 
    • Effective ways to lend 
    • Smart contracts accelerate and automate the lending process immediately 
    • Lending peer to peer provides better rates than conventional loans 
    • You can pay interest even with cryptocurrencies 
    • Any of the P2P loan platforms offer a competitive loan market where borrowers and lenders discuss interest rates and the repayment duration

    What are the Must-Have Features

    Advanced Search Functionality

    The search features should be seamless on your Blockchain-based P2P lending platform and should help investors narrow down opportunities on various criteria, including risk profiles, period, scale, country, or industry. 

    EMI and Loan Calculator

    These calculators allow visitors to see monthly installments depending on the given loan amount, period, and interest rate.

    To generate more leads, place such a calculator on the first fold of your website and create a separate page explaining the working of this calculator.

    KYC/AML Automation

    The regulations surrounding KYC / AML are strict, and all your potential investors need to undergo multiple verification tests. Regrettably, this is an inevitable measurement. But that can certainly be automated. Automating these processes saves your business time and resources, and you provide the end-user with a better experience using the time you have purchased.

    CRM System

    The crypto lending platform must handle the operational burden here, and encourage you to distribute information, announcements, and reports to relevant investors. Furthermore, the website can also include the information investors need — such as tax returns, financial reports — so that they can access them without having to contact the team immediately.

    Also, Read | Developing P2P (Peer-to-Peer) Lending Platform with Blockchain

    What's the Process

    Creating a lender’s profile 

    A lender must build a profile with personal information, including address, Identification number, banking information, type of investment, and more. Then, they need to submit it to the market. So that lenders and borrowers can find each other.

    Waiting for a borrower

    Upon establishing the lender profile effectively, the next step is to wait until a borrower makes a loan request.  If the lender receives any inquiry from the borrower, the lender will arrange a direct interview with the borrower as they see fit.

    A borrower's account creation

    Just as a lender created an account, a borrower must also create an account to access the loan. A borrower sets up an account with personal details like name, address, government-approved ID, and collateral such as cryptocurrencies, legal documentation, and a guarantor of a third party.

    A borrower requests a loan

    In addition to account formation, the borrower will also send a loan request to lenders worldwide. It is made possible by smart contracts, enabling borrowers to submit demands to lenders who wish to lend money for the investment a borrower needs to make.

    A lender connects with a borrower

    Whenever a lender accepts a borrower's loan request, he connects with the borrower before lending capital. During the consultation, essentially, a set of questions will be asked. Depending on which a lender either accepts or refuses the loan request.

    Deploying a smart contract solution for the rate of interest

    A smart contract plays a significant role in setting interest rates for various types of borrowers by verifying their creditworthiness. Borrowers may be classified based on high-risk, medium-risk, or low-risk default terms. Low-interest rates are set for a low-risk borrower with a decent rate of return, and vice versa.

    The lender lends a loan 

    When a borrower approves the loan application with interest rate and other conditions, the lender may give the amount of the loan to the borrower. The lender will transfer the money from their wallet to the borrower's wallet, and the borrower becomes responsible for the timely repayment of the loan.

    Payment automation with Smart Contracts

    Finally, equipped with a crypto wallet, the borrowers make payments through a smart contract. If a borrower fails to pay interest, a smart contract applies a late fee while updating the ledger on time. So, if the borrower immediately pays the loan according to the conditions, the smart contract solution will automatically subtract the fines.

    Also, Read | Analyzing the Components of a Blockchain-powered P2P Lending Platform

    What are the Use Cases 

    Education Loan Lending

    It was only recently that research institutions and educational organizations began to accept alternative funding as a means of fundraising. 

    Initiatives for this area may range from raising money to earn a degree to supporting innovative science programs.

    Furthermore, there is an ever-growing demand for student loans. However, not enough businesses offer this kind of refinancing.

    Car Financing

    It is one of the business sectors that is rising fast. Crypto finance sites for P2P car loans assist borrowers in buying cars via a lending scheme or with bank loan assistance.

    Real Estate Lending

    P2P crowdfunding is one of the most high-demand solutions in the real-estate sector. It tends to draw more and more investors. To raise the requisite seed capital for borrowers and to produce extra income for everyday investors, these are attractive substitutes. 

    P2P loans are far less costly than equity investments. The lenders are the first in line to get payoffs in case a proposal is on a halt. On the other hand, investors are more likely to take part in peer-to-peer investment schemes than to purchase shares in the firm.

    We have hit the conclusion of this detailed guide with that. If you have read this far, you have learned enough information to go ahead and build a P2P lending network focused on Blockchain. If you are still lost anywhere in the production process, please email us.

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