A P2P server is a marketplace where lenders and borrowers are connected and financing through money lending activities is facilitated.

Since these platforms are highly decentralized and not hegemonic institutions like banks, people are usually hesitant of availing them. Furthermore, from the investor’s point of view, P2P lending can prove to be risky. This is because even though lending is backed by smart contracts, chances of default are still substantial. Smart Contracts basically provide verification facilities that enable once to enforce the negotiation for the contract.

So if the risk is substantial, why do people still go for it? The answer is pretty simple,generally finance is accessible to only those people who

own liquid assets and can offer them as collateral, or Have a perfect credit report, with no history of default or delay on previous loans

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These practices limit the availability of finance to only a few sections of society. This problem of accessibility can be solved if borrower approach P2P Platforms. Moreover, it is quick and easy, unlike banks which take up to a week to process payments.

From the investor’s point of view, it enables them to earn more through interest earned. Usually the lion’s share of the interest earned is kept by the bank, and this problem of profitability for investor is solved in case of P2P platforms. Moreover, the procedure of Know Your Customer (KYC) and registration is also pretty quick and easy. It is a completely transparent process that ensures regular monthly income for investors.

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Apart from this, the risk is mitigated to some extent by various government bodies all over the world.

For example, in places like United Kingdom, the return on investment is also Tax Free, under the newly implemented Innovative Finance ISA. Basically, the IFISA enables and allows tax free interest and capital gains. The UK Government also has Financial Service Compensation Scheme (FSCS) which is essentially a state compensation scheme which protect investors in case of defaults. Although the FSCS doesn’t cover P2P lending yet, it tightly governs and oversees the P2P lending market atmosphere to ensure fair market practices.

In India, P2P platforms are legal and are categorized as NBFC-P2P through a notification in August 2017. The Rules and Notifications released by the RBI for the same can be found here. Therefore, the same way that the RBI regulates Banks and NBFS, it can also regulate all P2P platforms in India since they are legal business.

The individual’s prerogative becomes essentially important here because at the end of the day, the lender has to make a wise decision and choose their borrower prudently and after a thorough investigation of all facts. While evaluating someone’s profile, they must ensure to check their credit rating. This is done through the P2P platform itself wherein it gives basic information about the borrower’s history with other loans. Typically borrowers are rated from A to F, with A being the best to F being the worst.

They can also diversify, by investing small amounts (20–30%) of their entire portfolio in different opportunities. This is called diversification of risk, so even if one person defaults, the investor doesn’t go into a very deep loss since other investments are still safe and might turn profits. There are multiple levels.of diversification, first is through different types of assets such as equity, gold, etc, second is through different borrowers, and third level is through different P2P lending platforms.

Lastly going through a well reputed platform is the best way to ensure maximum safety. So to establish the finest reputation in the lenders and borrowers, BTCcredit has taken numerous steps. BTCC project will ensure the protection of funds as the first priority, besides making it easy for people to borrow crypto.

For more info on BTCC project, Visit us at:

Website: btccredit.io

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