P2P Lending Platform Concepts

Platforms connect lenders and borrowers. You will draw the flow of money between lender, platform and borrower and mark each fee and risk, so you can explain how the model works to a newcomer.

• Marketplace, pooled or direct models.
• Who sets the rate.
• Fees for both sides.
• Who bears default risk.
• Trace the flow of money in a simple diagram from lender to platform to borrower and back, and mark where the platform earns a fee and where each risk sits.
• Note that unlike a savings account, the money lent may not be protected, so lenders can lose some or all of it if borrowers fail to repay.
• Look at the main regulator's page for platforms and note what it asks.
• Describe how a loan moves from request to repayment in six steps.

Activity. Draw the flow of money.

Standard to meet. Show fees and risks in the flow.

Common mistake. Believing returns are certain.

Check yourself. What risks are stated?

Know the real cost. You will calculate monthly payment, total interest and total repaid for a sample loan, which lets you compare costs on the same basis instead of headline rates.

• Simple vs compound interest.
• Annual percentage rate including fees.
• How the monthly payment is worked out.
• Early repayment.
• Practise with a sample loan of 1,000 currency units over 12 months at 8 percent, calculate the monthly payment and total interest, and compare the result with a 6-month term.
• Always compare loans using the total amount repaid and the yearly rate on the same basis, rather than the headline monthly figure alone.
• Practise a simple loan table on a spreadsheet.
• Check what happens in the first and last month of a loan.

Activity. Calculate three loans.

Standard to meet. Check that the totals are correct.

Common mistake. Quoting rate without fees.

Check yourself. What is the total cost?

Not everyone repays. You will build a simple scorecard and explain why spreading small loans limits the damage of any single default, so credit risk becomes something you can reason about.

• Chance of default; share of the loan lost if it happens.
• Expected loss = chance x amount lost.
• Diversify.
• Check income and costs.
• Build a simple scorecard using income stability, existing debts and repayment history, give each a score from 1 to 5, and set a clear cut-off for acceptance.
• Spread lending across many small loans rather than a few large ones, because one default then affects only a small share of the total.
• Compare fixed and variable fees on small loans.
• Create a plain list of what a borrower must know.

Activity. Compute expected loss for grades.

Standard to meet. Build a table by grade.

Common mistake. Not diversifying.

Check yourself. How many loans?

What the lender earns. You will model net lender return under three default rates and a bad case, showing why optimistic returns can disappear when borrowers fail to repay.

• Gross rate minus fees minus losses.
• Timing of cash flow.
• Stress test: double the defaults.
• Compare with savings.
• Build a spreadsheet that applies an assumed default rate, such as 4 percent, and a fee to expected interest, then compare net return under three different default rates.
• Test a bad case where defaults double, and check whether lenders would still be treated fairly and the platform could cover its running costs.
• Keep a rule for when to refuse a loan.
• Test the scoring list with ten made-up applicants.

Activity. Build a return model.

Standard to meet. Show the stress case.

Common mistake. Skipping stress tests.

Check yourself. What happens?

Do no harm. You will explain loan terms in plain words and set repayment limits relative to income, helping a platform treat borrowers fairly and avoid pushing them into unaffordable debt.

• Affordability check.
• No hidden fees.
• Fair collections.
• Check for bias in scoring.
• Explain the loan terms to borrowers in plain language, including the total repaid, the late fees and what happens if a payment is missed.
• Avoid pressuring anyone to borrow more than they can afford, and set a limit such as repayments no higher than a stated share of income.
• List fraud signs such as the same device for many applicants.
• Define when a loan counts as late.

Activity. Write fairness rules and test a scoring list.

Standard to meet. Complete the bias check.

Common mistake. Biased scoring.

Check yourself. What did you find?

Tell the truth. You will write clear lender risk statements and note where local rules may apply, so the concept presents honest information and avoids implying guaranteed returns.

• Risk warning for lenders.
• Plain fee table.
• Complaint route and regulator.
• Records.
• Show lenders the risks in clear words before they commit, including a statement that returns are not guaranteed, and keep a record that they have read it.
• Check which local rules apply to platforms that arrange loans, and treat this course as learning material rather than advice on how to operate lawfully.
• Write a short script for a polite collections call.
• Check that complaint steps are visible on every page.

Activity. Draft a disclosure sheet.

Standard to meet. Write at a plain reading level.

Common mistake. Long, dense disclosures.

Check yourself. Does yours pass a reader test?

Run it safely. You will design daily payment checks, an exceptions log and a staged late-payment process, giving the platform a repeatable way to catch problems early.

• Ring-fenced funds.
• Reconciliation.
• Fraud and identity checks.
• Back-up and wind-down plan.
• Set up daily checks that payments received match payments due, and keep a log of exceptions with a note on who resolved each one and when.
• Define a clear process for late payments: reminder at day 3, a call at day 10, and a written plan offered before any further action.
• Create a one-page lender warning in plain language.
• Plan how to wind down safely.

Activity. Write an operating checklist.

Standard to meet. Include the wind-down.

Common mistake. Mixing funds.

Check yourself. How are funds kept?

Explain simply. You will present a five-slide concept with one worked loan example and respond to reviewer challenges, which shows whether your assumptions can survive scrutiny.

• One-page concept.
• Biggest risks.
• Next steps: adviser, regulator.
• Plan 90 days.
• Present your platform concept in five slides covering problem, how it works, risks, numbers and fairness, with one worked example of a single loan.
• Ask a reviewer to look for weak points in your assumptions, and revise the model after each round of questions.
• Ask a finance adviser to review the concept in writing.
• Never present this concept as ready for real money.

Activity. Present the concept.

Standard to meet. Write a clear risk section.

Common mistake. Calling a concept a product.

Check yourself. What limit did you state?

Defaults double in one month.

Question: Response?

Model answer: Stress model, inform lenders, review scoring and collections.

Rates for one group are far higher.

Question: Check?

Model answer: Investigate bias in the scoring and fix.

On the slide: L1 Basic · Basics of borrowing

Notes: Describe what lending is and why a lender needs a return. Notes: work out interest on a small practice loan. Standard: correct simple interest.

On the slide: L2 Awareness · Awareness

Notes: Describe how peer lending platforms match lenders and borrowers, and the risks (default, platform failure, fraud). Notes: read a public risk warning. Standard: each risk with a plain meaning.

On the slide: L3 Foundation · Foundation

Notes: Build a practice return model for ten loans with default and fee assumptions. Notes: spreadsheet, practice data. Standard: model shows return before and after defaults.

On the slide: L4 Practitioner · Practitioner

Notes: Test the model under three default rates and write a risk warning a lender can understand. Notes: no real customers or money. Standard: results table and a warning that avoids promises.

On the slide: L5 Specialist · Specialist

Notes: Design a concept and risk review of a lending platform, with a worked return model on practice data and no real money or customers. Notes: include borrower checks and a failure plan. Standard: return model correct and the review lists legal and licensing steps.

On the slide: L6 Advanced · Advanced

Notes: Review lending concepts with a governance structure, stress tests and disclosure. Notes: add a regulator-ready summary. Standard: disclosures state risks first and stress cases are documented.

On the slide: L7 Super expert · Super expert

Notes: Set the borrower-assessment, risk-warning and disclosure method for peer lending and teach the reviewers who use it. Notes: re-read the lending rules for the place and update the warnings.