The insurance component we offer here at Socin.org is what makes this peer-to-peer lending platform truly unique, yet it is the least understood aspect of our service. If you have visited other peer lending platforms, you will realize that the biggest hindrance to smooth lending is how to recover the money loaned. Most of these peer lending platforms operate on the basis of splitting an investor’s money into many small chunks which are lent to different people. The idea is that a huge percentage of these people will pay back what they borrow thus protecting the lender. This does not always work and some lenders end up losing money or recovering only what they invested in the first place. Socin insurance recovers every cent invested by a lender.
When lenders are assured of recovering all their money, more are willing to provide loans. In addition, the insurance opens up borders allowing lenders to engage borrowers from every corner of the world without fear. Our insurance has two aspects, which every member needs to understand in order to take full advantage of this platform.
- Setting insurance
- Paying insurance
Understanding the Two Aspects
- Setting insurance is whereby a borrower pays money so that a certain amount can be shown next to his/loan request as insurance. For instance, after paying $100 what will be shown next to the borrower’s requests is $2400. This is the amount Socin commits to pay back to any lender in case the borrower takes a loan and fails to make repayments. This is done only once
- Paying insurance is making the actual premium payment. Before a lender can fund any loan, he/she has to pay a loan sourcing fee equal to 4% of the full loan amount. Since this is paid for every loan, it is what covers any compensation when there is a default as well as platform operation costs.
When developing this platform, we needed a way to distinguish how much insurance coverage to offer every borrower. We considered many options but the most practical one is asking the borrower to pay a small amount to the platform first and shift the risk of ensuring the lender is compensated to us.
Apart from ensuring every party involved in these transactions shoulders part of the risk, the insurance payment also helps lenders gauge whether a borrower’s claims have any weight. For example, when a borrower says that he or she has a business that is doing very well, the lender only needs to check whether the borrower’s request has any insurance. After all, if a borrower cannot even afford to pay a small amount as insurance, there is a big chance the so called ‘good’ business does not exist or it is not doing that well.
How Often Insurance Has To Paid
You only need to set your insurance once. The amount of coverage you have will be displayed to lenders whenever you post a loan request. You can increase your insurance coverage any time you want by paying more money. This money will be added on top of what you already have. For example, if you have paid $50 and you decide to add another $50, your insurance coverage will shoot from $1200 to $2400.
How to set your insurance
It’s easy to set your insurance coverage. Log into your account and navigate to “my account” area. Open finances tab to reveal the option to buy insurance. Enter the amount you want to pay and follow the page prompts. You will be redirected to PayPal where you can pay using your PayPal account or a debit/credit card. Remember, the amount paid to set insurance is fully refundable if the borrower does not receive a loan.
So the insurance product benefits both lenders and borrowers in equal measures. We also believe that by shouldering the full risk of loans, this platform will grow to become the number one resource for people engaged in peer-to-peer lending.