P2P Lending Masterclass: What Is P2P Lending, How Does It Work, Is It Safe, How Is It Taxed?

Hearing a lot about P2P lending lately? Wondering what P2P lending is, how it works, how you can earn a passive income from it, and what you should know before you lend your money? P2P lending, or peer-to-peer lending, is becoming an interesting part of the personal finance and investment conversation. But before you start lending, it is important to understand how the whole process works. In this first chapter of the 1 Finance P2P Masterclass, we explain P2P lending in simple terms. We start with the basics. What is P2P lending? How does P2P lending work in India? Who is the lender, who is the borrower, and what role does a P2P lending platform play? We then look at what happens when a borrower applies for a loan, how borrowers are evaluated, and what lenders should look at before choosing whom to lend to. The video also explains Borrower Quality Score, or BQS, how borrower quality is assessed using multiple data points, and how factors such as income, expenses, existing loans, and credit behaviour can help you understand a borrower’s profile. But P2P lending is not only about choosing a borrower. We also discuss P2P lending risks, P2P lending returns, loan tenure, monthly EMI repayments, and diversification. Why should you spread your lending across different borrowers? What happens if a borrower does not repay? And how can you think about risk and return when building a P2P lending portfolio? We also cover how your money moves through the P2P lending process, how repayments reach the lender, the investment limits involved, and how interest income from P2P lending is taxed. So, whether you are completely new to P2P lending, searching for how P2P lending works, or already considering it as an alternative investment option, this masterclass is designed to give you a clear understanding of the basics. In this chapter, we cover: • What is P2P lending? • How does P2P lending work in India? • Is 1 Finance P2P RBI Registered? • RBI rules for P2P platforms • How to choose borrowers in P2P lending • What is Borrower Quality Score or BQS? • What is FOIR? • How borrower underwriting works • P2P lending risks and returns • Why P2P is a non-market-linked asset class and how it diversifies your portfolio • Why diversification matters in P2P lending • How P2P lending repayments work • P2P lending loan tenure and investment limits • How P2P lending income is taxed Stay tuned for the complete P2P Lending Masterclass to understand the basics before you start lending. FAQs 1. What is P2P lending? P2P lending means one person lends money to another person who needs it. The P2P platform facilitates the transaction between lenders and borrowers. 2. How does P2P lending work? A borrower comes to the platform looking for a loan, and lenders provide the money. The money does not move directly from the lender to the borrower. It is routed through a lender escrow account managed by the platform. 3. What is the role of a P2P lending platform? The platform does more than simply connect lenders and borrowers. It onboards participants and carries out borrower underwriting so lenders can understand the quality and background of the borrower. 4. How do I choose a borrower in P2P lending? The video explains that lenders should look at factors such as the Borrower Quality Score, FOIR, credit score, loan tenure, expected returns, and borrower diversification before deciding whom to lend to. 5. What is Borrower Quality Score or BQS? BQS is a borrower quality metric discussed in the video. It uses five different pillars and more than 250 data points covering areas such as identity, financials, income stability, behaviour and credit behaviour. The score is rated on a scale of 1 to 10, with a higher score indicating better borrower quality within this framework. Chapters 0:00 Introduction to P2P lending 1:17 What is P2P lending? 5:35 Onboarding process 9:55 Investment mechanics 19:54 Understanding risks 23:36 Evaluating borrowers About 1 Finance P2P: www.1financep2p.com 1 Finance P2P is an RBI-registered platform on a mission to make credit accessible and lending rewarding. Built on trust and transparency, we connect verified borrowers directly with a portfolio of lenders, no middlemen, no hidden fees.