Why is P2P Lending a Smart Investment Option?

peer-2-peer-lending

Stock prices have been fluctuating drastically, bullish one day and bearish on the other. Bonds also fluctuate without offering any hint. Mutual funds and SIPs come with the pro-longed lock-in periods. The interest rates offered by the banks, particularly for short-term tenure, have very little to offer in terms of the valuable gains. With such information, what does a judicious smart investor who is looking to make most out of his funds do? Consider the new lucrative investment option which P2P (peer-to-peer) lending offers.

Peer-to-Peer Lending

Peer-to-Peer lending is a totally tech-driven investment that gives an annualized return of around 18-22% to the lenders and the earning starts from the very first month itself. The returns are better as you lend directly to borrowers and intermediary costs are reduced drastically. Globally, peer-to-peer lending has emerged as an opportunity not only for the borrowers but also for the lenders as an excellent investment tool. Countries like the US and the UK have led the growth of peer-to-peer lending. Today, China is one of the largest peer-to-peer lending markets in the world.

With the appeal of excellent annual returns, simple and flexible, tech-enabled processes, the investors as young as 20-22 years all over the world are moving to P2P lending platforms for investing their funds and planning the finances for their future.

P2P lending is emerging as one of the most sought after avenues for investment. This is due to various reasons. The benefits which come with peer-to-peer lending makes it a superior investment alternative as compared to the fixed income and equity investments. Some of the key reasons which make peer to peer lending a smart investment option include:

Higher Rate of Returns

When you choose P2P lending as an investment opportunity, you could earn interest which would be much higher as compared to the traditional investment options. The rate of interest could even be 30 percent annually. Some of the research data show that the peer-to-peer loans are provided on an average annualized interest rate of 16 percent. It is significantly higher when compared to interest offered by the banks for their Fixed Deposit (6-7 percent).

Convenience

Since most of the P2P lending process is online based, the application process is very straightforward and simpler. Borrowers could check the personalized rates with just a few clicks and from anywhere and anytime. A borrower could also track the funding progress with respect to how much of the loans are funded by investors on a real-time basis.

Also Read: How to Start Your First Investment Plan

Flexible Tenure

With P2P loans there’s no long-term commitment. You could offer loans to the borrowers even for just a few months and also for few years. You could spread the investment across the loans with varying tenures like 6-9 months, 1-2 years, etc.

The Bottom Line

While most of the investors are earning better returns on the peer-to-peer platforms, a big chunk of the society hasn’t still heard about it or has been skeptical with respect to investing in them.  Peer-to-Peer lending is an excellent opportunity if you are looking for an investment option for investing your hard-earned money. For a lender, paybacks are quite amazing, with quite decent returns. Cutting the long story short, for further enhancing the income portfolio, a smart investor should consider entering the territory of peer to peer lending, look for relevant information and develop a diversified portfolio. The key idea is to ensure a clever risk-to-reward approach while starting small, however, thinking big – since at the end of the day, every cent matters.

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