Peer to peer lending in Nigeria is a way to borrow without using a traditional bank or credit union. The interest rate on P2P loans in Nigeria can be surprisingly low, but varies widely depending on your credit assessment. P2P loans are growing fast but still account for a small percentage of total loans in Nigeria.

P2P loans are loans made by individuals and investors – as opposed to loans that come from your bank, People with extra money offer to lend that money to others (individuals and businesses) in need of cash. A P2P service (such as a website) matches lenders and borrowers so that the process is relatively easy for all involved. P2P means that individual investors most of which are large institutional investors such as hedge funds and investment banks—direct capital to P2P transactional marketplaces, like KiaKia, which then decision loans based on a proprietary credit model.

How Peer to peer lending works

Peer to peer lending in Nigeria funds your loans in two ways. Some sites post your application for up to 14 days, giving potential investors opportunity to review your application. Investors then decide to fund your loan, providing a portion of your total requested amount.

The alternative way P2P companies fund your loan is by approving your application and drawing funds from a pool of blind investors rather than having investors individually review your application. In this case, you do not have to wait for your loan to be funded because the company decides to fund your approved amount in full, and the time to receive your loan is simply the time for confirming information and processing. Typically, this process takes a few business days, though some services offer same-day or next-day deposits if all paperwork is in order.

After you receive your funds, you pay back your loan in equal, monthly payments.

Peer to Peer lending in Nigeria is usually based on loan terms between three months and two years. A few factors affect the term of your loan, but most often, the amount of your loan and your loan grade weigh mostly heavily in determining the term.

Peer funded (individual): Individual peer support is a new type of funding alternative for both borrowers and lenders. Peer funded loans are provided by regular individuals or peers and not financial institutions.
Peer funded (group): Similar to individually funded peer loans, many hedge funds, bank endowment funds and other large investors fund personal loans through the peer-to-peer or social lending platforms. The difference between individual and group peer funded loans is typically the amount of money lent-groups typically lend greater amounts than individuals.

Advantages of Peer to Peer

Peer to Peer loans in Nigeria aren’t always better than loans from a bank or credit union, but they have some unique features that make them competitive.

Low costs: you can often borrow at relatively low rates using P2P loans. You just need to pay enough interest to make your lender happy – and most of the interest you pay goes directly towards compensating your lender. With banks and credit unions, there are higher overhead costs for branch networks, other lines of business, and a large workforce. P2P borrowing is usually a better deal than using a credit card, but it always pays to compare rates.
Quick and easy: shopping for loans is a pain. And after you apply, you might have to wait a while to find out if you’re approved
Easy, fast online application process
No impact on credit score for checking your interest rate
Lower interest rates compared with some credit cards and traditional financial institutions
Fixed interest rates and monthly payments with no hidden fees
You remain anonymous to your lenders, and they won’t contact you directly
No prepayment penalty if you decide to pay off the loan before its due date
Loans are unsecured, so you don’t have to provide collateral such as the title to your car
There’s a social aspect because you get to monitor online as investors fund your loan up to its total amount
You can apply for additional online loans if you handle your initial loan responsibly

Disadvantages of Peer to Peer

You may be required to raise a certain percentage of the funds before the loan can be disbursed. e.g 80% of loan requested
The time to receive the loan depends on how long it takes investors to fund your loan plus standard processing time, typically a few business days.
If your request reaches 100 percent funding or the listing time expires – given you meet any percentage requirements – you may accept or decline the loan.
To get your loan funded with a P2P lender, expect to pay an up-front origination fee of 1% to 5% of the amount of your loan.