How to Create a Money Lending App and Succeed: Tips to Start

P2P lending websites and apps make it possible to lend money simply sitting in your armchair. These apps are becoming pretty trendy in the FinTech world. Would you like to find out how to arrange P2P lending app development services? Stay with us and we will show you how interesting this process is.

P2P lending is usually spelled out as a “peer-to-peer lending” or “person-to-person lending”. This term means issuing and receiving loans by individuals directly without the use of conventional financial institutions such as an intermediary. Commonly, P2P lending is performed with the help of special peer to peer lending sites where users can be both lenders and borrowers.Also, some specialists call it a loan app.

The majority of credits (loans) issued in such services are performed by private individuals, but in some cases, companies as an entity can participate in such processes as well. P2P loan rates can be both fixed or assigned with the help of a reverse auction. As for the latter, potential borrowers assign the maximal rate level they want to take a loan at, and potential creditors bargain with each other offering funds at a lower rate.

Companies-intermediaries that create peer to peer software (e.g., launch DeFi lending platform development) get income from fixed payments, borrowers or in the form of a small percentage from the sum of the loan taken both from the borrower and creditor. It provides you with an answer to the question “what is P2P lending app?”.

Like every technology, the P2P trend has its strong and weak sides. Let’s consider pros and cons for P2P lending app.

Lack of an expensive intermediary

Peer to peer lending platforms has a few significant differences from a conventional bank. First, there is neither a bank nor expensive intermediaries, and customers don’t need to pay for banking services, visit branches, convince the creditor to issue a loan for your since you are solvent and trustworthy. The system is completely carried in an online environment, and all operations are performed via Internet platforms that exist at the expense of minimal fees for applications or monthly fees. No large sums, no deposits and guarantors are the main advantages of the peer-to-peer system. The British company Zopa was the first entity that offered the capability of peer-to-peer lending investment in 2005.

Creditor and borrower determine the conditions

Both the investor (creditor) and borrower can choose the conditions for the future bargain - the deadline, sum and interest rate. The provider monitors how participants abide by the accepted rules. For example, one person can apply for only one loan issuance. He or she has no right to request for a new loan if the previous one is not paid off. To become a participant, a user just needs to register and fulfill a special form. And it would be better for the borrower to fill in as many points as possible - it will increase his chances to get a loan. A special rating shows the user’s solvency. That is how peer to peer technology works.

Thorough inspection

A potential borrower should upload scanned copies of his or her passport and tax identification number. Also, such individuals can submit materials proving their solvency like copies of documents, pictures, videos etc. Best peer to peer lending apps always provide users with high level of trust. The provider will offer to raise your rating and your personal data will be tested in the bureau of credit ratings. It doesn’t cost too much but it will have a substantial influence on potential creditors, so it is one of the best benefits of peer to peer lending app.

Small interest rate

A high interest rate in banks is caused by high prices for the services of banks and microfinance companies. They need to pay a premise rent, employees’ salaries, finance the development of new products etc. But everything listed is absent in a person to person lending platforms. No premises, no thousands of employees, no office equipment. Thus, P2P lending can really become beneficial! Bingo!

In whole, we can see the main advantages here. But if we speak about disadvantages, there some of those also.

Debt collectors

If the borrower doesn’t pay off his or her credit on time, debt creditors can come into play to make the user pay this money. It is not a pleasant procedure, especially in its moral aspect. But the same can happen when you cooperate with conventional banks.

Loan amounts are not so high

Since P2P lending platforms are rather new, not all creditors are ready to issue millions of dollars to the invisible borrower. So at the moment, loan amounts in peer to peer programs are usually limited to $50,000. Moreover, this amount is not so low as well.

Now let’s discuss what you should do first if you want to create your own P2P lending app. How to create a money lending app? The process won’t be easy and fast but the result is worth the candle.

You need to choose how to register a legal entity. That is why you need to choose what type is more appropriate for your business.

• For example, if you register your legal entity like a corporation or LLC (limited liability company), you will protect your business against creditors if any force majeure or bankruptcy occurs.
• If you choose a corporation form, then mind that corporation implies more requirements than LLC like tax reporting/accounting.
• In LLC profits and losses are distributed according to the agreement, whereas a corporation should perform it following the share of ownership of each participant.

As it is a financial structure, you must choose the necessary service and register as an entrepreneur. You will need to follow all governmental requirements in this issue in order not to break the law if you are looking for ways on how to create loan app. Also, don’t forget that your business name shall be absolutely new to avoid repeated names of peer to peer lending companies already registered in this system. If you create a business in the USA, then make sure that the name you want is free on uspto.gov. And brand name must be different from the domain name. The domain of your platform should be rather short and memorable, and, of course, it must be unique. The cost of domain registration may vary from $20 to $100, and higher. Everything depends on the value of the domain. Consider it during loan lending app development.

As in the case with any startup, you will need a specific amount of funds that you will spend for the development of your app. But also you must share some funds for the first loans. Why? Because if new borrowers start getting loans, such measures will help attract investors. Which is the best way to raise initial capital? We can offer you three options:

• ICO. Initial coin offering or ICO will help you attract investments if you sell investors a fixed number of new cryptocurrency units (tokens).
• Venture capital. You may try to attract venture capital. To do it, you should create a business plan and pitch deck to show it to investors. If they are interested in it, they will invest money in the development of your project, but they will have their share in your business. Or you will have to pay a fixed amount with the agreed interest.
• Take a loan. Yes, to start the development of a loan app, you need to take a bank loan. But if you succeed, you will return this loan rather quickly.

Also, you will need money to start cooperating with the bank where you will keep your money for P2P lending loans.

The selection of an experienced team is already half the work done. So again, specialized platforms can help you in your search. To avoid making a mistake when choosing a development company, study the solutions they delivered before , review the real customer feedback, and how they dialogue with clients. Also, keep in mind that in such a specific area as Fintech software development services, the team of developers need particular work experience.

As usual, your product cannot be a difficult-to-understand peer to peer architecture. The simpler it is, the more people will feel comfortable using it. So you’d better integrate all basic features, make interface user-friendly and not overloaded with icons and pictures. It must contain all MVP features and maybe some additional ones if your budget has reserved funds. Think as a customer. All actions the app performs must be clear and simple. By the way, you may find out how we create UI/UX at Cleveroad.

For a start, you need to build a website to gain more trust and users. The next step should be mobile lending app development for iOS or Android platform. It is much more convenient due to mobility and quick access to the app. You should also need to determine how your app will be created. You can make everything from scratch if you have a large team of programmers skilled at various programming languages. The last and the most acceptable way to develop an app - to order the whole development from software companies on a turnkey basis. They will do everything starting from creation to post-release support.

When your application is released, the work may be continued. Since launching an landing application can mean a large, one-time load on the servers, it is necessary to have additional capacities. Otherwise, the crash of your application will likely scare off users.

Also, don’t forget about software support services! This work may include version updates, performance improvement, debugging, and more. Finally, it’s important to gather feedback from your audience. If this is not taken into account, then there is a chance to lose a significant layer of users.

Unfortunately, you should always be on the alert. Some difficulties are waiting for you on your way to the P2P lending Olympus. We will list the most common of them.

These points must be discussed in a separate section since they are critical if you want to do your business legally and avoid fines and penalties. Besides, you need to protect a loan app and website to make sure it won’t be hacked by malefactors.

Fault tolerance must be ensured. Developers need to consider that your P2P lending app should be fault-tolerant. It means it will work uninterruptedly even if heavy load due to a large number of simultaneous operations may occur. That is why developers need to use a special tool that will handle fault tolerance.

Security comes first. Creating a web app or website you should learn how to secure your website, and you need to protect your software from the most widespread risks like XSS (cross-site scripting), SQL injections, sensitive data exposure, broken authentication, and so on. To encrypt all personal data of users and lenders from a third party, you will have to apply all modern encryption techniques and signature technologies. Also, all users should have encrypted authorization via PIN codes, passwords, and even biometric authentication. So here you need to pay much attention to the security issue.

GDPR compliance. If you create software for the EU market, you need to make your lending app GDPR-compliant. GDPR, that stands for General Data Protection Regulation, became effective on May 25, 2018. This guide on important EU directives for business will help you follow all rules to the protect personal data of users properly. It is a vital step you cannot ignore or bypass if you don’t want to be fined.

CCPA compliance. California Consumer Privacy Act (CCPA) is the act that you are obliged to keep up with if you build software for California residents. The main goal of this law is to give users more control over their personal data. CCPA becomes effective since January 1, 2020, and if California is your target market, you need to make your P2P lending app CCPA-compliant. To find out all details about CCPA, read our recent article.

Don’t forget that local laws and regulations may vary, everything depends on the location where you plan to create a P2P lending app for. So if Asia, United Kingdom, Australia or other regions - pay rapt attention to local regulations of each region.

Your app is developed and waiting for somebody to use it. But how can you promote it? You should undertake a few strategies to deal with such challenge.

App originality

Although this technology is not old, the number of P2P mobile apps and websites is growing every year, so your new app must become something different from other top peer to peer lending apps available on the market. There are some ways to do it:

• For instance, you can choose only one type of lending for a specific purpose. That is, your app can give loans to students for education or medical loans for treatment;
• You should always do a market analysis to understand what apps prevail. It will help you not to become one of many but to stand out from the crowd due to something new in your app; 
• You can try to focus not only on personal loans from one person to another but also on business loans to entities. It will be a hard-to-implement process, but beneficial for you and give you a competitive advantage in the business world. 

Involve the press

Mass media is one of the best ways to attract people to some new product. Everybody knows it. So you may involve the press to tell the whole world about your new P2P lending app.

• If you are able to cooperate with the press, it will help you draw the attention of potential investors to use your platform for lending money. Nobody wants to lose their money so if the press starts spreading news about your app - it will give investors and borrowers more trust in your service;
• Or you may find an opportunity to cooperate with already popular and known financial platforms that will show your company in a good light.

Good old advertising

This alternative can be referred to the mandatory way to promote your app. Nobody will install and use your app if there isn't any word about it, right? So you will have to place your ad on as many websites and other web services as possible. Of course, it would be better to target financial services to find the required audience. Never forget about social media! Today many people spend a lot of time there so this tool is great for searching for new customers. Be brave and may the odds be ever in your favor!

Before looking for a team and creating an application, you should note the pricing policy among IT companies differs widely. The app development price depends on many factors, such as design, QA services, and cooperation models. But the geolocation of developers also has a significant impact.

In general, money lending applications development range from $5000 to $30,000+. To get a precise understanding of cost and budget, you can request a consultation with our Senior business development manager of the Fintech Unit.

Our client is an investment company that has been on the market since 1988. The company wanted to expand to a micro-investment domain and needed a reliable tech partner to to create a micro-investing app from scratch.
The Cleveroad team developed and designed a fully functional and intuitive micro-investment platform with all the modules required, including multi-factor authorization, Know-Your-Customer (KYC) verification with liveness detection, and the monitoring and reporting system. We have also conducted an analysis of the legal requirements of Saudi Arabia to ensure the solution meets all the demands of local legislation, namely FMIA.

As a result, our client received a micro-investment platform that considers all the pains, gains, and goals of the traders.The solution was developed as compatible with SAMA Cybersecurity Framework. After the assessment, the app was successfully verified and now can work freely without risks of regulatory sanctions. The quality of development and consulting allowed our customer to release the app quickly, receive positive feedback, and get substantial financial results right after the start.

Explore Micro-investment platform case in more detail.

We have an individual approach for every project and provide our customers with a range of benefits:

• Thorough research conducted by our business analysts and free project estimate
• Hands-on software development experience across different domains
• Guaranteed high-level protection data by following best security practices and regulations
• A variety of flexible partnership models suitable for every case: dedicated team, fixed price, time & materials
• Full-cycle software development and ensuring top quality of your solution
• Utter team structure comprising all the essential high-qualified specialists
• Innovative development approach and cutting-edge tech stack

Cleveroad professionals are ready to help you with your project. You’ll be provided with a thorough consultation from our domain experts and a custom lending application tailored to your business needs.