P2P site makes loans easy, raises ex-Infosys money

Faircent today reportedly raised an undisclosed amount of funding from Aarin Capital, a fund led by ex-Infosys CFO and chairman of Manipal Global Education, Mohandas Pai. Faircent is a community loan exchange site that facilitates peer-to-peer lending and borrowing.

Faircent previously raised US$250,000 from M&S partners in June 2015 as well as an undisclosed amount of funding earlier in the year from the promoters of Fusion Microfinance Pvt Ltd, Devash Sachdev and Ashish Tiwari. This fresh funding means that Mohandas Pai will join the board of Faircent as an advisor. The startup currently claims to have over 15,000 borrowers and 3,000 lenders signed up.

Trading money gets a little easier

Because most banks make most of their revenue from differences in interest rates – what they pay depositors versus what they charge borrowers – loans often come with massive fees. Faircent allows borrowers and lenders to dictate their own interest rates and charges minimally for each transaction.

In order to lend on Faircent’s service, you must be at least 25 years old, have a minimum yearly income of INR 1,000,000 (US$15,400), and have past investment experience using a trading or “demat” account (a dematerialized account where shares and securities are held electronically for investors). Profits made from Faircent cannot exceed more than 30 percent of a lender’s total income.

Borrowers must make a minimum of INR 300,000 (US$4,620) a year. Both borrowers and lenders must be Indian residents and are charged a one-time listing fee of INR 1,500 (US$23) when they sign up with the site. Lenders are charged a small processing fee for every INR 10,000 (US$1,540) that they lend thereafter.

Most of Faircent’s borrowers are using their money to fund businesses, consolidate debts and pay for family events.

After registering, borrowers can post their loan requests online. This includes information like loan amount, how long they want the loan for, and the amount of interest that they’re willing to pay. They are also asked to provide the reason they are requesting a loan. Lenders can agree with these requirements or make their own offers to borrowers. Borrowers can also approach specific lenders with their own loan proposals. Faircent includes the option of allowing multiple borrowers and lenders to interact on the same deal.

Once an agreement is reached, the two sign a formal contract. The lender then transfers the agreed-upon amount to the borrower’s account, and the borrower makes payments over the decided time period. Borrowers can pay with post-dated cheques or electronic transfers. If a payment is delayed, Faircent pursues the penalty. Penal interest is 24 percent per year and Faircent also charges an INR 500 (US$8) fee.

Earlier this year, Faircent announced a partnership with US-based companies TransUnion and Yodlee. TransUnion provides real-time credit appraisal of borrowers while Yodlee aggregates account data across various platforms to provide insights on financial management.