How To Improve Your P2P Loan Application

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Gone are the days of visiting a bank for a loan, sitting through documentation processes, and waiting for the approval for days, or even months at end, with the fear of loan rejection constantly haunting you.

The emergence of peer-to-peer companies has made borrowing much easier. They are the new financing method which eliminates the middlemen and puts the borrowers directly in touch with the lenders. Classified as a ‘non-banking finance company’ by the Reserve Bank of India, peer-to-peer companies are preferred over banks and other traditional financing companies. This is because of the quick and easy verification processes of peer-to-peer companies, low rates of interest, and easy availability of loans. For lenders, peer-to-peer companies offer attractive interest rates. The highest amount for the transactions is capped at ₹10,00,000. Also, according to an RBI mandate, no borrower can receive more than ₹50,000 from the same lender across all peer-to-peer platforms. These two rules make the risk a moderate one—both for the borrower and the lender.

The Borrowing Process

Peer-to-peer companies like RupeeCircle have a strict verification process for the borrowers. Once the borrowers have registered, RupeeCircle takes care of loan-assessment and profile verification. Once the verification is done, the borrower is provided with details like approved loan amount, rate of interest, and applicable EMIs. Physical verification of the borrower’s residence and documents is carried out. A loan agreement is signed between the borrower and the lender, making the contract legally enforceable. The loan is then listed on RupeeCircle marketplace for investors to check and fund.

The Credit-Rating-Score Model

RupeeCircle Credit-Rating-Score Model is a grading technique for grading the borrowers. The borrower’s details are collected from over two-hundred touchpoints including borrower’s financials—salary, investments, financial stability, credit history, social and other behavioral patterns, online buying behavior, and many more. All this is used to assign a credit-score to the borrower based on how likely the borrower is to default on the payment. Grade A is the strongest and grade F being the weakest score.

Improving a Loan Application

  1. Know your purpose

A strong loan application reflects a straight-forward purpose for the loan. Most peer-to-peer companies offer loans up to ₹10,00,000. The borrower’s reasons for getting a loan could be widely different—from funding a startup to vacation abroad—but the main criterion for loan approval is based on the likelihood of loan-repayment. In other words, the borrower has absolute control over what he spends the money on. So it becomes important for the borrower to know his purpose really well.

2. Research

A clear idea about the interest rates, time period of the loan, and EMIs helps in putting your best foot forward. A good understanding of the repayment process backed by thorough research helps you stand-out among other borrowers. A general rule of the thumb is that the monthly EMI should not be more than ten-percent of your monthly salary.

With peer-to-peer companies, borrowers can get an interest-rate as low as 12%, unlike traditional financial institutions which are generally fixed at 18%. Also, the time period is not usually more than 24-36 months. Taking these facts into consideration, preparing a well-thought out plan will definitely help in improving loan applications.

3. Credit Score

Your credit score is of utmost importance in deciding your loan-amount, interest-rate, and monthly EMIs. Comply with the company’s verification processes can help you achieve a safe credit-score. The same holds true for physical verification processes as well. If the company trusts you, so will the lenders. This will certainly help in raising higher amounts as loans.

4. Credit History

Your credit-history assumes significant importance when applying for a loan. It reflects if you’re a safe borrower or not. If your credit cards are always paid-off on time, if you have never skipped a payment nor attracted any penalty, then it is definitely going to benefit you during a loan-application. If not, it might be a good time to start sorting the credit-history right away.

5. Defaults

As much as defaults evoke hatred, it is utopian to think that they are completely avoidable. Sometimes, defaults are unintentional. If your credit-history shows loan-defaults, highlight how quickly you have repaid the due amount and how you have minimized the probability of a default after that.

A good credit-history and the right research can bring you one step closer to your dreams. So, what are you waiting for? Log on to and walk another step towards your dreams.

Sumeet is the lead content writer at RupeeCircle, where he articulates with innovative storytelling. When he's not writing or editing content for RupeeCircle's blog, he's a stand up comedian and a full time entertainer. Connect with him on Facebook and Instagram!

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