When it comes to online financial technology (fintech) loans, there are two of the most popular loan services, namely peer-to-peer (P2P) lending and payday loans. These two services are ideal loan product alternatives if you are unbankable or have not met banking criteria.
But there are still those who don’t know that even though they both provide fresh funds, both of them have quite different business models. Are you one of them?
When you need loan funds, of course, you have to know the type of credit service needed. If not, it is clear that the application will be rejected outright. In addition, knowing the right type of loan service can also make expenses more economical. It’s as simple as choosing a loan with the lowest fees and interest but still safe.
Compared to bank loan products, generally the terms and criteria for applying for loans from fintech are easier to meet. In addition, the procedure for submitting funds to be received is more practical and faster. Some banks take approximately three months to disburse loans. Meanwhile, it is said that fintech loan funds can be disbursed within 30 days at the longest.
So, between P2P lending and payday loans, which one is more suitable for your current needs? For those of you who are looking for a Payday Loans, let’s find out the difference between the two fintech products through the following reviews.
Difference between P2P lending and payday loan
1. Source of loan funds
P2P lending services are like a market that brings together borrowers and lenders called investors.
Thus, the source of loan funds comes from fellow P2P lending service users, both individuals and legal entities or business entities who want to invest the funds they have. This investment profit is obtained from the loan interest borne by the borrower.
Meanwhile, the source of funds for payday loans comes from capital funds belonging to related fintech companies. As a result, if there is default, the company will bear the losses. Unlike P2P lending, where the risk of defaulting debtors is the responsibility of the fund provider or investors according to the regulations of the Financial Services Authority.
Therefore, applying for P2P lending loans is not as easy as a payday loan. P2P lending service providers must at least ensure that potential borrowers are credit score-worthy so that investor risks can be reduced.
To get around the risk of credit default, some P2P lending providers also apply the joint responsibility method, which is to take responsibility for paying loans together.
For example, in Amartha P2P lending, the implementation of joint responsibility is carried out by grouping 15-20 debtors. If there is one member who does not make credit payments, the other members are obliged to jointly carry out the responsibility or pay jointly.
2. Purpose of the loan
With both online loan services, it turns out that the goals of P2P lending and payday loans are different. The term online loan usually refers to a payday loan type loan.
This loan is intended for unexpected needs before payday arrives, both daily needs or fulfilling a lifestyle such as buying new gadgets or additional vacation funds.
Therefore, the type of payday loan debt is consumptive debt, which is debt that does not increase the income or income that is owned. In consumptive debt, its value will continue to decrease over time.
Now you know the difference between P2P lending and payday loans, right?
Ideally, if you want to keep your financial condition healthy, payday loan services should be avoided, given the high interest and fees.
Meanwhile, if you need additional capital, P2P lending services can be considered. When it is bankable, you can switch to business loan products from banks, such as business credit, which charges lower interest and fees.