Technology-based financial services in Indonesia are increasingly flourishing. Indonesian people are also increasingly familiar with various financial technology transaction (fintech) options and services. If the source of the loan came from friends, family and banks, now the community has switched to fintech. Of the various types of fintech available, there are two of the most popular, namely payday loans or what we are familiar with online loans and peer to peer (P2P) lending.
5 Things are different online loans from P2P Lending
Type of loan
The first aspect of the difference between online loans and P2P Lending lies in its type. Online loans are personal loans for urgent or emergency needs. According P2P Lending, loans are usually in the form of business capital to smooth business cash flow.
The second aspect is the time (tenor) of the loan. Online loan tenors, which must be paid at one time, cannot be paid in installments and incur additional costs if the borrower is late in paying. According in P2P Lending, loan tenors range from 30 days to 12 months.
Online loans offer daily interest starting from 0.8% per day or 292% per year while P2P Lending only offers relatively low interest ranging from 16% to 30% per year. Why are P2P Lending rates lower than online loans? This is because P2P Lending always refers to the interest rates of bank loans or other financial institutions by emphasizing the point of accessibility and speed of the process as well as supply and demand in which lenders take a look at market conditions. In addition, P2P Lending does not take advantage of interest costs because the whole belongs to the lender.
Level of risk
The fourth aspect that distinguishes online loans from P2P Lending is the level of risk. In P2P Lending in general, the risk of default will be borne by the funding party according to the Financial Services Authority (OJK) rules. So it is only natural that most P2P Lending companies don’t just give approval to prospective borrowers who are not credit worthy.
Such a process is not strictly carried out by online loans, so the ability of borrowers to repay loans is often overlooked in the submission process. Such conditions often trigger delays, even failure to pay from the borrower. If this happens, the online loan company will use an external party to do the billing.
When applying for loans via an application, online loan customers are often not aware of the rules imposed by the service provider. Such is the case with regard to contact person data. Please note, when downloading an online loan application, there is actually a provision that states that the user allows the application to view the contact list contained in the cellphone.
Due to lack of customer attention, it often becomes a problem later, especially when there is a late payment. In some cases, improper billing methods are also often complained of by customers. No wonder the business model like this is often labeled as online-based loan sharks by the public.
Regarding strategies to minimize the risk of default, there are P2P Lending companies that implement a joint responsibility system. In this case, the borrower can form groups of 10 to 15 people. So, if one borrower fails to pay, another member will assume the risk.
Source of loan funds
The last aspect that distinguishes online loans from P2P lending is the source of loan funds. Fintech loans online provide loans from their own funds. According P2P Lending funds come from crowd lenders or people who invest.
The presence of P2P Lending and online loans is expected to bridge the gap in public financial access in Indonesia. However, the functions and needs between P2P Lending and online loans must still be distinguished, given the two fintechs have different segmentation. The rest, the existence of these two financial services is considered capable of increasing the financial inclusion program that has been launched by the government. Online loans are usually relatively small in value because loans are given only for a short period of time. This loan is intended to help you cover the cost of unexpected needs before the payday arrives.
This type of loan is quite popular because the proposed loan money can be obtained only in a matter of hours or a maximum of 1 working day. According P2P Lending is a fintech service that provides money loans to individuals or businesses. This financial services service also applies for loans to lenders and connects online lenders with borrowers or investors online.