What differentiates P2P lending from traditional lines of credit is its technology-driven approach to credit assessment, which is a lot more inclusive than that of banks and other financial institutions. “Traditional lenders still have extremely rigid rules when it comes to making credit decisions,” said Rajat Gandhi, founder and CEO of Faircent, a P2P lending platform. “As a result, many potential borrowers, such as self-employed individuals and small and medium enterprises, who deserve credit, end up being excluded by the financial system. P2P lending platforms connect borrowers in need of credit with individual investors possessing surplus funds and make the process of availing it simpler and faster. As a result, borrowers are able to fulfil their financial requirements at significantly lower interest rates than what is available in the market. On the other hand, by investing their money in P2P lending platforms, lenders can generate much higher returns on their investments. For instance, lenders on our platform usually avail average annual gross returns of 18 to 26 per cent. This makes online P2P loans a lucrative alternative investment avenue for them.”

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