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The launching of P2P (peer-to-peer) lending platform provided an investment option for highly-effective savers and smaller investors. It enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman.

Blockchain facilitates the process of recording data, offers greater visibility, efficiency, and scalability. Also, it reduces costs (it does not require middlemen and regulations to the process of lending) and accelerates the processes (traditionally, applying for a loan or credit can take a couple of weeks).

What makes the whole process in blockchain inherently transparent and incorruptible is the fact that anyone on the network can have access to the same, up-to-date data, and the data cannot be altered or tampered with.

However, when blockchain are applied to P2P platforms, lenders and borrowers have great opportunity as it opens international lending and debt to anyone, anywhere, transforming how we exchange value and bringing more trust and transparency to the system.

Hence, the use of blockchain in p2p lending helps to remove intermediaries such as loan officer, banks, underwriter, and loan processor which in turn has helped in cost reduction by allowing the borrowers to deal with lenders directly.

This means that P2P lending blockchain Platform requires only the lenders, borrowers and a guarantor as the stakeholders.

Are you wondering how blockchain works in p2p lending?

This is exactly how it works;

A lender creates a profile that has the information below:

• Personal Information that includes Name, Address, and ID number
• Bank Account Information
• The investment type either for business purposes or for a different purpose
• Setting up the rate of interests according to the worthiness of a borrower.

The profile is submitted to the market place were lenders and borrowers could meet and once the account is successfully created, lender waits for a loan requests and schedules an interview as soon as any request is received.

A borrower on the other hand setup an account that has the following;

• Personal Information including name, address, and government-approved ID
• Collateral- Crypto-coins, legal documents, and a guarantor.

Once the account is successfully created, with smart contracts, a borrower can send loan requests to the lenders who are interested in the type of investment.

After receiving the loan request, a lender interviews borrower based on the type of investment and can either approve or reject the loan application.

The smart contract then decides the interest rate for different borrowers (high-risk, medium-risk or low-risk) if the lender approves the loan by checking their creditworthiness, but the rate of interest for different borrowers remains fixed all over the world.

Using smart contracts, borrowers can make payments and if a borrower does not pay instalments in time, the smart contract upgrades the ledger adding late fees to the actual amount.

Lastly, we need to understand that Blockchain-based Peer-to-Peer platform can help to make quick approvals, reduce time wasting, remove the need for intermediaries, and make it transparent.

Please drop what you think about this topic on the comment section below