How to Create a Peer-to-Peer Money Lending App? | Eastern Peak

Understanding P2P money lending apps

How a P2P lending app works

A peer-to-peer money lending system allows individual borrowers and lenders to perform money deals without the mediation of a conventional bank or broker. The participants have equal rights, and a peer-to-peer lending app is the only intermediary that runs the formal and financial procedures.

Pros & Cons of using P2P lending platforms

Old-school banks are the most widespread and time-tested mediums for money lending, and over the years, they have transformed and have become even more sophisticated.

Convenience and cost-effectiveness

If you decide to borrow a sum of money through a loan application, you’ll avoid annoying queues, in-person interactions, and even additional expenses on banking services. The app allows loan repayments in one digital space and does much of the job for you fast and seamlessly, all from the palm of your hand.

Favorable rates

Since there is an absence of any mediators, no one will make you pay more for additional banking services, its employees’ salaries, rent or equipment. Due to the infrastructural costs of traditional banking services, interest rates tend to be higher.

Tailored loan conditions

The steps of the involved parties are quite autonomous in the P2P loan interaction and can directly determine the loan conditions such as sums, interest rates, and deadlines. In this way, P2P money lending becomes a flexible system that attracts people who don’t appreciate strict banking requirements.

Multiple customers for a single lender

Apart from some of the general conveniences and obtained benefits, P2P lenders can also reap other specific advantages. Not only do they cut costs and enjoy the convenience of the app, but they can also lend to several borrowers simultaneously.

Safety and trust

Although there is no third party in the process of online lending, peer-to-peer lenders can have trust in the security of the application and the parties involved due to the system’s thorough inspection process. The users must provide scanned copies of their documents to prove solvency. For an additional fee, you can also test your personal data and thus boost rating higher.

Limited accessibility

Not everyone can participate in P2P lending. If your credit rating is poor, you may need to pay interest rates that are even higher than in conventional banks. In some cases, you may not even be able to become a P2P borrower for the same reason.

Loan amounts are lower

Peer-to-peer lending sites are safe and trusted but still not fully compatible with traditional options; you can borrow up to several tens of thousands but nowhere near millions of dollars.

Debt collectors are still there

While lending apps are often automated and AI-powered, you will not get any protection if you can’t pay off the loan in a timely manner. The platform can involve debt collectors that will force you to repay in court. However, this scenario is also relevant for traditional borrowing.

The main types of P2P loans

Your app can focus on one P2P lending type or combine several of them. Each kind of loan has its unique set of features and audience.

  • Personal loans. Personal loans from private individuals are a widespread type of peer-to-peer money lending, as it has fewer restrictions, lower rates, and requires less application paperwork. These loans cover a wide range of needs for common people, from different types of bills and purchases to debt consolidation.
  • Business loans. Some P2P lending apps invite companies to become a borrowing party. It’s a more complicated process than individual on-demand money lending because you need to prove the credibility and prospects of your business. For that reason, startups have fewer chances of receiving peer-to-peer loans.
  • Home loans. People often need loans to buy a property or furnish it. Some of them prefer adaptable online lending options, with the interest rates calculated based on the borrower’s paying capacity.
  • Car loans. Vehicles are arguably as demanded as real estate which makes car loans a common request. Car P2P money lending works similarly to home loans, just the interest rates may be higher.
  • Educational loans. Students pay for higher education, and it’s often the case that they can’t afford their dream college or university because of exorbitant costs. That’s when P2P money lending platforms come into play and help make the students’ dreams come true.
  • Medical loans. Medical insurance is essential for healthcare yet unaffordable or burdening for many citizens. That is why some P2P lending apps include this type of loan into their service spectrum.

Examples of peer-to-peer lending apps

Payoff

In 2005, Payoff was in the avant-garde of the peer-to-peer lending app development. Today, it remains one of the leading fintech apps in the niche thanks to its favorable conditions: the APR being between 5.99% and 24.99%, loans up to $40,000, and compensation terms between 2 and 5 years.

Upstart

In 2012, a group of former Google workers created one of the most beloved peer-to-peer lending websites. It stands out among other similar platforms, as it allows people to get loans even if they are first-time borrowers or don’t have an extensive credit history. The service can request information about your education or job to estimate your creditworthiness.

Peerform

Peerform is a peer-to-peer lending app, founded by the members of the Wall Street administration in 2010. It provides peer-to-peer loans with starting interest rates of 5.99%.

Upgrade

Upgrade is among the most flexible peer-to-peer lending platforms. It offers loans for various needs starting from $1,000 to $50,000. For small loans, you will get a favorable APR of 5.94%. However, the maximum APR of 35.47% is pretty high even compared with traditional credit union options, not to mention other P2P lending services.

Prosper

In 2005, Prosper was one of the first US P2P money lending platforms, and today, it also remains prominent. Borrowers on Prosper can get a loan from $2,000 up to $40,000 with interest rates of 7.95%-35.99%. The range of loan types is quite diverse, from debt consolidation and healthcare to home repair.

How to create a money lending app

1. Do market research

Peer-to-peer loan lending app development begins with the discovery stage, just like with any type of app creation. You need to learn the market inside and out, understand how it functions, learn your target audience, and how to create a loan app that will bring desired outcomes.

2. Security and legal compliance

Loan app development goes hand in hand with security issues. Could you trust your money to questionable users through an insecure application? As a developer, you need to protect both users’ data and your product.

  1. Authentication. Identity verification protects users’ personal data. Luckily, developers possess a huge choice for authentication methods, from passwords and 2-factor authentication to face recognition and fingerprint scanning.
  2. Encryption. On P2P lending platforms, data encryption is vital. Use only secure server connections and leverage all tools and means to avoid data breaches and other privacy issues.
  3. Legal compliance. Besides technical matters, regulatory aspects are highly important for apps that contain users’ sensitive information and mediate money transactions. Make sure you know global and local laws and comply with them.

3. Choose a business model

You need to put an enormous effort into building quality and in-demand fintech apps. So you might also want it to pay off in full. Luckily, you have a selection of business models to choose from.

4. Must-have and additional features

If you want to build a money borrowing app, you need to know about the essential and optional features it should have. Without must-have functions, your project won’t be viable and demanded, and additional details can make it more interesting, helpful, and engaging.

  • Registration form. It’s the first step your potential clients make after app installation. It’s important to make the registration process fast and simple. Consider adding a possibility to sign up with social media accounts or a phone number.
  • Personal profile. On this page, users can edit personal data or add more information about them or even track their in-app activities. Design it clearly, so users can navigate intuitively.
  • Loan application. This tab is the heart of a loan app. First-time users would highly appreciate a brief guide on the basic functions and possibilities of the loan application procedure.
  • Loan calculator. Automated loan calculation simplifies the process of choosing the most appropriate lender. Potential borrowers don’t need to count monthly payment amounts, interest rates, and other crucial points on their own.
  • Payment tab. This section lets users track their payments and commitments. Also, make sure you have multiple payment and withdrawal options to satisfy a broader audience.
  • Payment schedule. The feature breaks down a loan amount into yearly, monthly, or weekly payments. So, the borrower gets a payment plan that helps design the budget.
  • Notifications. While in many other apps this function can be optional, it’s essential for peer-to-peer lending platforms. Users need to pay off the loan on time, so it’s better to notify them a couple of days before the upcoming payment.
  • Credit score. In many peer-to-peer lending websites, lenders consider the borrower’s credit history before they decide to provide them with a loan, so it’s an important metric for such services. Connect your loan app to a credit score service to help users track their creditworthiness.
  • Ratings. It’s kind of a reward for users who meet their loan obligations reliably and in due time. Just like credit score, the higher your ranking, the more chances you have of finding a loan partner.
  • Chatbot and live chat support. Your app should be as comprehensible as possible, but some users may still want to get some assistance. Make sure they can reach out to a human or bot for help.
  • Geolocation. If your app has a payment option that allows the use of ATMs, the geolocation feature can help users find the nearest spot.
  • AI-based analytics. This feature provides quality real-time analysis of in-app activity. Users can get additional info about potential lenders and borrowers. App admins use AI-based analytics to get an insight into the app usage and user experience to further improve the app.

5. APIs integration

Financial APIs can be a powerful tool for building an effective P2P lending app. APIs can improve the production process, save money, cut the time for development, and empower your fintech app with additional functions. It’s one of the aspects that make online lending more efficient than traditional banking, both for individuals and financial institutions.

6. UX/UI

Although users choose fintech apps rather for their functionality than design, the latter is still essential. We’ve compiled some quick tips on how to polish up your fintech app using UX and UI.

7. Develop an MVP

When you feel you are ready to develop a loan lending mobile app, it’s better to start with an MVP. This thoughtful step can save you quite a lot of time, effort, and even money. A minimal viable product will show the slips and mistakes you’ve made on the go.

8. Gather user feedback and scale the app

If you want to know whether your app works well, just ask your users about it. Add features to gather feedback: invite clients to rate your app, leave a comment, participate in a quick and concise survey, interview them in a chatbot, or even suggest writing an email. Positive or negative, these reviews provide invaluable insights into the functionality of your app down the road.

Summing up

Peer-to-peer money lending is a new form of financial interaction between people who need financial assistance and those who can support them. It’s a convenient alternative to traditional institutions that can be profitable for P2P lenders, borrowers, and you as an app owner.

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Eastern Peak is a custom software development company which possesses deep expertise in working with startups and building intuitive mobile apps from ground up.

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Eastern Peak

Eastern Peak

Eastern Peak is a custom software development company which possesses deep expertise in working with startups and building intuitive mobile apps from ground up.