Peer to peer lending, also known as P2P, brings regular people together to participate in one transaction as borrower and lender.
Borrowers go to P2P platforms to apply for a loan, and investors or lenders show up to fund these loans and receive a potentially higher than average return on their investments.
Both lenders and borrowers can be regular people, which is why it’s called peer to peer.
With peer to peer lending, lenders can enjoy a higher interest compared to interest rates they would get in a bank.
Borrowers can also apply for loans easily and conveniently because the loan is processed mostly online.
Peer to peer lending can fund different loan purposes, such as financial emergencies, personal or business expenses, real estate, and many others.
How does P2P work?
Lenders fund the capital that a borrower needs. The amount that borrowers receive can come from one lender or several lenders, which is then combined or pooled to accommodate various loan amounts.
For as little as 5,000 PHP, you can already be a lender in P2P platforms. You can choose which loan applications to fund, and you can earn from the interest that the borrower pays.
If you want to invest your money, P2P is something you can consider because it’s easier and less complicated. It does not require a huge amount of investment as well.
Getting started
Like any other loan application, borrowers need to fill out an online registration or application form.
An identity verification and credit history check will then be conducted, after which you will be assigned an interest rate if you get approved.
The interest rate will depend on how much you’re planning to borrow and how long you plan to pay for the loan.
Once your account is approved and active, it will show up in the market for possible lenders to see and fund.
When you are a lender in a P2P platform, you will be able to see loan requests and browse through loan amounts, interest rates, and loan purposes.
After reviewing the borrower’s credentials and you’re satisfied with the loan interest, you can fund the entire loan or pool your money with other lenders until the loan amount is completely funded.
Some peer to peer lending platforms in the Philippines
Blend.ph
Developed and managed by Inclusive Financial Technologies Inc, Blend.ph offers an easy, safe, and convenient financial exchange platform for borrowers and lenders.
For a minimum investment of 5,000 PHP, you can receive an interest income of 6% to 30% per annum.
To be a lender, go to https://app.blend.ph/register/investor to create an investor account. Fill out the online form accordingly and submit the requirements needed.
Your account will undergo review.. Once it is approved, you can start depositing funds to your Blend Wallet and choosing which loans to fund.
Monthly repayments ( principal + interest) will be credited to your Blend Wallet.
To become a borrower, go to https://app.blend.ph/register/borrower to register a borrower account.
Loan interest rates will be determined by your credit standing.
As long as you submit complete requirements, you can expect a hassle-free approval and quick funding by lenders.
If you get approved, your loan will be posted and lenders will be able to fund it.
FundKo
FundKo is another P2P lending platform that allows you to diversify and invest only a maximum of 10% of your funds to a single borrower.
You can invest for as little as 15,000 PHP, and lenders will get monthly repayments based on the borrower’s loan repayment schedule.
It offers salary loans, personal loans, maternity loans, working student loans, SME business loans, and even credit card refinancing.
With FundKo, you can borrow anywhere between 20,000 PHP and 200,000 PHP, payable for a maximum of 12 months. You can refer to this table below:
| Type of Loan | Loan Amount | Loan Term |
| Personal Loan | 10,000 PHP – 200,000 PHP | 3, 6, 9, or 12 months |
| Maternity Loan | 20,000 PHP – 50,000 PHP | 12 months |
| Cashback | 50,000 PHP – 400,000 PHP | 12 months |
| Working Student Loan | 20,000 PHP – 50,000 PHP | 3 and 6 months |
To apply for a loan, go to fundko.com and create an account. After you confirm and activate your account, you will receive an SMS with your Loan ID and verification code if your application is successful.
Acudeen
Acudeen helps SMEs with funding their receivables, boosting their cash flow, and finding dynamic solutions to their business needs.
This P2P lending platform connects business owners ‘sell’ their receivables to different investors.
To sign up as a funder or investor, register on the Acudeen website.
Verify your email, complete the Know Your Customer documents and requirements, and confirm your bank details.
For account activation, a minimum initial deposit of 1 million PHP is required.
As an individual or corporate funder, you will be funding SMEs’ invoices which usually experience issues with cash flow, also known as factoring or invoice discounting.
It’s a financing option for SMEs who have lots of receivables but still need to wait approximately 1 to 3 months before being paid by their clients for products or services rendered.
As a buyer of these receivables, you are helping these SMEs to get paid sooner, allowing them to grow their businesses faster.
If you want to sell an invoice on Acudeen, register for a free account , complete your Know Your Customer documents, upload a copy of your invoice, and wait for your cash to be credited.
Once your receivable has been funded, it will reflect in your e-wallet, after which the seller can withdraw it.
Vidalia
This P2P lending platform allows you to invest in personal and business loans, securing your money and giving you solid cash returns.
As per Vidalia’s website, you can earn as much as 18% per year on loan investment returns. Your money is also protected by Vidalia Lending.
To become a lender, create an account on vidalia.com.ph. Fund the account by mobile or online banking, cash, or check.
To become a borrower, complete a quick online application and wait for a credit evaluation after interviews and document submissions.
If you get approved and your loan gets funded, you can pick up your loan check at Vidalia or have it deposited to your bank account.
You can refer to this table to find out what types of loans are being offered and how much you can borrow.
| Type of Loan | Loan Amount | Loan Term |
| Personal Loan | Up to 100,000 PHP | 2 to 12 months |
| Business Loan | 100,000 to 500,000 PHP | 2 to 12 months |
| Salary Loan | Up to 50,000 PHP | 2 to 12 months |
| Small Business Loan | Up to 100,000 PHP | 2 to 12 months |
The pros of peer to peer lending platforms
Easy and convenient loan application process
You can get approved in just a matter of hours. That is if you meet the loan requirements and have a good credit standing.
Sign-up is often done online, and you can submit the requirements online as well.
These P2P lenders also prioritize data security, so you can rest assured that your personal details will not be leaked or stolen.
More lenient with requirements and credit credentials
A good credit standing is important. But even if you don’t have an impressive credit score, it doesn’t mean that you will automatically be rejected for a loan.
You can still be approved for a loan, but possibly with a slightly higher interest rate.
Many loans to fund with your full discretion
You can choose which loans to invest in or fund based on the borrower’s credit standing, the loan’s interest rates, or the chances of full repayment.
As a lender on P2P platforms, you can invest on a borrower that you feel confident in.
Passive income
You really don’t need to do anything after picking a good borrower.
When the loan is given to the borrower, you can enjoy your passive income with loan interest.
The cons of peer to peer lending platforms
Smaller loanable amounts
If you’re thinking of getting a loan from P2P lending to finance your home renovation or purchase a property, it’s not the best choice.
Most peer to peer lenders have a maximum loanable amount of 500,000 PHP.
The repayment period is also shorter compared to what banks offer. With P2P lending, the maximum is usually just 12 months.
Higher risk of defaulting
Because anyone can sign up on P2P lending apps, the risk of borrowers defaulting on their loans is high.
Before deciding on becoming a lender or investor, find out how the platform can protect you as an investor and how much of your investment is covered.
How to reduce your risks when investing in peer to peer lending platforms
- Diversify your funds.
- Choose borrowers that have good or higher credit scores and lower debt-to-income ratios.
- Go for borrowers that are more secure and stable with their jobs.
- Favor loans whose purpose is for debt consolidation. This indicates their desire to lower their monthly payments, which means the risks for defaulting will also be lower.
- Invest only if it’s within your risk tolerance.
- Try to reinvest your earnings so you can get more.
The bottom line
Investing in peer to peer lending platforms can be a profitable venture if you know the risks involved.
If you’re aware of what you can earn and what you can lose, you can consider P2P investments as part of your investment portfolio.
It’s ideal for people with money that they can part with and will not severely affect their financial status if things go south.
If you can use your P2P investments to supplement your fixed monthly income, that would be more than ideal.
With peer to peer lending platforms, always have a contingency plan. They may be quick and convenient, but the chances of a borrower defaulting on their payments will always be there.