Peer-to-peer lending applications (P2P) allow individuals borrow money directly from each other without using traditional banking institutions. This happens through specialised lending sites where peers can act as lenders as well as borrowers. Collectively, these platforms are called the lending apps.
Most of the loans are issued by individuals. Sometimes, however, companies can act as a loan giver. The loan rates can be either fixed, or set by a reverse auction. This means that an individual sets the maximum rate he wishes to pay and the potential loan givers compete with each other by offering the best rate based on the information provided.
Lending app developing companies make money by getting a fixed fee or a percentage from the loan amount both from the borrowers and from lenders. This sounds like a perfect idea, but every technology has advantages and disadvantages.
Let us look at what they are.
Lack of costly intermediaries. The platform allows borrowers and lenders dealing with each other directly, there is no need to pay banking service fees. The convenience of receiving a loan without paying a visit to a bank, lack of credit checks as well as the ability to do transactions online at a small fee is a great advantage.
Set up terms (by borrowers and lenders). The borrowers and lender can negotiate the terms, repayment deadlines and loan rates before they get into a transaction. The provider then controls if the terms were adhered to and limits the service by “one person – one loan” rule. This means that an individual cannot receive another loan before he repays the previous one. The registration process allows providing detailed information about the borrower and counts towards the borrower’s rating. Based on that rating lenders can see how trustworthy and solvent their potential borrower is.
Thorough checks. A borrower will need to submit copies of his passport and tax ID. Along with these, he can provide copies of his assets that will serve as a proof of his repayment ability. The provider will ask Bureau of credit ratings to test the potential borrower’s personal data and this will increase chances of getting a loan.
Moderate fee. Unlike banks, money lending platforms do not need to incorporate huge overhead expenses into their fees. Thus, there is no need to escalate the service fee to start making money through an app.
Debt collectors. In the event a borrower fails to repay the loan, debt collectors may get involved. This procedure does not differ much from the traditional way of borrowing money from a bank, but rather appears as an ethical thing.
Limited loan amounts. Money lending apps is a fairly new tool of getting a loan. Unlike banks, these platforms can give loans for up to $ 50,000. Perhaps, with time as the creditors feel more secure about this fintech, the loan amount will increase.
What do you start with if you want to create a money lending app?
First, you will need to register a legal entity. Here you can choose between a LLC (limited liability company) or a corporation. Each of these types has their specifics and you need to decide which fits your business goals.
Then you will have to register a business name. Since money lending app is a financial service, you will need to meet all the governmental and legal requirements to register. Choosing the right business name that is unique and stands out is important. Make sure the domain for your online platform is concise. This will benefit your app in the future. Domain registration fee varies from $20 to over $100.
Plan through your initial capital. You will need to possess certain funds not only to build a platform, but also to act as the first lender on your own app. This will increase your rating and attract other investors/money lenders. In addition, you will need some money to start working with the bank where you will keep money for your app.
Think through a design and start with a website before making an app. This will give you a better understanding, what your platform looks like, how user-friendly it is and will gain you trust from your first users. Depending on your budget, your app must have MVP features and preferably add-on features that will make it convenient to use and unique at the same time. Make a research, survey or get feedback from your target audience to crystallise those features that can make your app one of a kind.
Work on the content. Your app should have policies and procedures, loan agreement, terms and conditions that are relevant and comply with regulations of your region. Make your app is as transparent as possible, make sure there are no hidden fees and the information is laid out in a clear and logical manner.
Hire developers to make a money lending app. Ideally, they should come from the same company that made a website for you to stay consistent. If your budget allows, agree on the full cycle of service from design to post-release for your peace of mind. Communicate to your developers that it is crucial your app is fault-tolerant and secured against cross-site scripting, SQL injections, broken authentication and sensitive data exposure. Make sure the team you hire for this uses the most modern encryption techniques and signature technologies. The cost of building a money lending app may go between $ 48,000 and 84,000.
Test your app for bugs and errors before releasing it. You may be tempted to launch your app as soon as possible, but do not skip this step. It will reveal potential weaknesses of your platform both in term of design and functionality. Remember, that money lending app should be a quick service, the last thing you want is service interruptions when you launch your app.
This, however, is not all you need. As a financial service provider, you will need to ensure you have an experienced lawyer, financial specialists and a bank partner, who will support you through your journey in this sensitive financial business.
As requirements for registering financial services like money lending app vary from region to region, you need to check your local regulations to comply.
Once your app is ready, think of ways to promote it. Social media or traditional advertising – make sure your app stands out.
Here at Magnise we have a proven track record of building apps for various platforms. Our teams of professional developers have gained excellent reputation. Contact us and we will be delighted to help you implement your ideas into a successful app. .