Most of the P2P Lending platforms were born by providing personal loans, or loans with the direct provision of money to the Applicant, without the need for guarantees on his part.
This type of loan is suitable for the P2P mechanism because:
- it has medium-small cuts, which lend themselves more easily to financing demand through the sum of many small fees paid by a series of Providers
- the management of the credit criteria adapts to the use of statistical methodologies with respect to other types of loans and, therefore, allows the creation of significant economies of scale.
Today, P2P Lending is an established model that has proven to be able to provide significant amounts and thousands of loans, with the same reliability and security found in a bank – on the other hand, the activities are subject to the supervision of Banca d ‘ Italy – while assuring the Applicant important advantages.
P2P Lending is a simple, fast, transparent and advantageous model for everyone.
The 4 distinctive elements of the personal loan granted by the P2P Lending system are:
- Simple process, fast and close to customer needs
- 100% online delivery
- Tailor-made loan offer: each Applicant reimburses according to his / her creditworthiness / repayment capacity
1. Simple process, fast and close to the customer’s needs
- The answer to the loan application and the estimate are in real time.
- The Applicant’s documentation is made available through a simple “upload”.
- Each Applicant is contacted for assistance in the various stages of the process.
- Approval takes place in 24 hours with fundraising, digital signature and immediate disbursement.
2. 100% online delivery
- Free from schedules, transfers and without the need to go to branches and / or agencies.
- Advantages of information and transparency.
3. Tailor-made loan offer
P2P operators evaluate the Applicant’s profile to define their creditworthiness, that is, the Client’s ability to repay the loan requested. The assessment takes into account several factors combined in statistical models. It is important that the P2P operator is able to build a risk-adjusted pricing model of the loans, that is, capable of attributing to the Applicant an offer consistent and proportionate to its creditworthiness and repayment capacity.
A reliable and sophisticated loan pricing model
The need to develop a reliable and sophisticated pricing mechanism, achievable with access to the Credit Bureau (CRIF, EXPERIAN, CTC) and with a rigorous and adequate internal scoring model, is dictated by the need to protect the interests of the Providers of the platform . The different rates therefore incorporate the variability of the creditworthiness of the Applicants, which is defined using the information obtained from the credit databases and the operator’s experience.
The pricing model described also allows customers who do not take into consideration the possibility of accessing personal loans to finance their needs to approach the request for financing. The Risk-Adjusted Pricing model and the disintermediation of the banking system ensure that the applicant is treated better than the corresponding treatment on the traditional market.
Transparency is a fundamental value of the P2P operators’ business as the business model itself dictates it.
For regulation and transparency, intermediaries are obliged to present the so-called “SECCI” form (abbreviation for Standard European Consumer Credit Information) or “IEBCC” (abbreviation for basic European credit information) during the offer phase. to the consumer) that from 1 June 2011, with the entry into force of Legislative Decree no. 141/2010 in transposition of the EU Consumer Credit Directive, replaced the previous documents. It is a standardized form that contains all the information necessary for the evaluation of the credit offer. In fact, in the SECCI form it is mandatory, among other things, to indicate the global cost of the personal loan (the APR- Annual Effective Global Rate);while it is not mandatory to include any insurance or optional products in the total cost.
For an Applicant the cost of a loan is made up of two components:
- the interest rate (Nominal Annual Rate – TAN) which represents the remuneration of the money and of the risk assumed by the lenders;
- the cost of the platform service.
Both production factors in the P2P model are purchased by the Applicant at market values, as they are provided by different subjects and not merged with other services.
To these components there are no additional costs and accessory products that are not mandatory and not required. The offer, in these cases, should not include early redemption costs which may affect the categories of most exposed applicants and should not include ancillary products, such as insurance or credit cards.
In the case of P2P Lending, the Applicants pay a market interest rate which reflects the remuneration requested by the Provider for the risk assumed. From this derives the need and uniqueness of P2P operators to use a “tailor-made” offer model, capable of attributing to the Applicant an offer that is consistent and proportionate to its creditworthiness.