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Difference between P2P Lending and Online Loans
Published on 30 Nov 2023
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Difference between P2P Lending and Online Loans
Along with the development of increasingly sophisticated technology, of course, this makes it easier for people in various aspects, one of which is in making loans online or what is often known as pinjol. Online loan services are widely used by the public because of easy access and fast disbursement processes, so they are often a solution for people who are in financial distress.
But what about Peer-to-Peer lending? P2P lending is also known as shared funding fintech, where this funding service brings together borrowers and lenders. This funding is usually used for business capital, where both parties benefit. Therefore, P2P lending is now popular among millennials because it can be used as an investment instrument.
What is the difference between Online Loans and P2P Lending?
Although both are done online, people are often confused about the differences between the two digital-based loan schemes. So what are the differences between online loans and P2P lending? Let's see, here are 7 differences between online loans and P2P lending:
1. The borrowing party
P2P lending platforms usually target borrowers who are in need of funds for business capital purposes, from MSMEs to companies. In other words, business owners utilize funds from P2P Lending for business or productive activities. Later, the profits from the project will be shared with the lenders.
Online lending platforms, usually target borrowers with a wider public reach, especially for people who have urgent or consumptive needs. The requirements requested are also quite easy, namely only uploading personal data documents and biometrics to disburse the funds needed.
2. The Lender
The lender in P2P lending or fintech funding comes from individuals to other individuals with the intermediary P2P lending application, or it can be said that the source of the loan comes from investors.
The lenders on online loans are managed directly by the loan service provider platform. So that transactions occur both ways and the entire loan process is managed directly by the loan service provider platform.
3. Source of Funds
Funds in P2P lending come from the personal funds of individuals who want to invest these funds so that both borrowers and lenders benefit.
Meanwhile, the source of funds in online loans comes directly from the online loan platform.
Read also: Difference between Consumptive P2P Lending & Productive P2P Lending
4. Risk Level
Based on the provisions of the Financial Services Authority (OJK), in P2P lending, the risk of default is borne by the funding party. Therefore, the loan process in P2P lending is quite strict and selective.
Although the process of online lending is quite fast, there is a risk of late payment, as the company does not conduct an in-depth analysis of the borrower's ability. Therefore, online lending platforms usually penalize borrowers for late payments.
5. Application process
The loan application process in P2P lending requires a long process. The process involves investors as well as checks on the identity of the borrower which includes BI Checking or SLIK OJK. The process aims to avoid the risk of default by the borrower.
Whereas in online lending, the application process is fast with just the identity of the borrower and several guarantor phone numbers. In addition, online loans also do not involve other parties so the process is shorter and does not take a long time.
6. Guarantee
The loan process in P2P lending requires collateral from the borrower, which can be in the form of assets or securities. This is to ensure that the borrower can pay according to the terms of the loan repayment.
As for online loans, borrowers do not need to provide any collateral, just upload their personal data and emergency contacts so that the loan funds are disbursed more quickly.
7. Loan Limit and Tenor
Loan limits on P2P lending are higher than online loans. The amount can touch hundreds of millions to billions. The high ceiling amount certainly affects the loan tenor. This is fairly reasonable because of the need for funds for productive activities.
While the limit on online loans has a limit that tends to be lower than p2p lending, ranging from 500 thousand to 80 million Rupiah with tenors ranging from 3 to 12 months.
Conclusion
Well, that's the difference between Online Loans and P2P Lending. For those of you who plan to take an online loan, you must pay attention to the important aspects mentioned and make sure the loan is by your ability to pay! You can use ethical platforms to invest your funds through sharia, safe, and legal methods!
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Notes:
1. Tech-based Islamic Financing service (P2P Financing) is a civil agreement between Funder and Beneficiary, in which all risks are charged to all parties.
2. Payment failure is charged to the Funder, except for fraud case and mismanagement. Beneficiaries are imposed if fraud and mismanagement happens as in Risk Sharing terms based on Islamic Principles. There is no national institution or authority that is responsible to financing risk or payment failure or compensating on any parties including loss, failures, fees or consequences after.
3. The platform with agreement from all respective users (funders and/or beneficiaries) accesses, gains, stores, manages and/or uses users’ personal data (Data Utilization) on or in the objects, electronic devices (including smartphones or cellular phones), hardwares or softwares, electronic documents, applications or electronic systems belong to Users or managed by Users, upon the information of aims, limitations and mechanism of Data Utilization to the Users before the approvals.
4. Funders with limited knowledge on this financing are suggested not to use this service.
5. Beneficiaries are obliged to consider return rates/margin/service fee and other fees according to the ability to repay the financing.
6. Each fraud is recorded electronically in cyberspace and easily recognized by public through social media.
7. Users should read and understand this information before deciding to be a Funder or Beneficiary.
8. Government as in this case is Otoritas Jasa Keuangan (OJK) / Financial Services Authority is not responsible for violation or disobedience of users, Funder and Beneficiary (intentionally or unintentionally) against terms and conditions or agreement or attachment between the platform and Funder and/or Beneficiary.
9. Each transaction and financing activities, funding, financing or enforcement agreement regarding financing between or involves the Platform, Funder, Field Partner and/or Beneficiary should happen through escrow account and virtual account as stated in OJK regulation No. 77/POJK.01/2016 about Tech-Based Financing Services.
