P2P investment is a Non-Banking process to lend money to individuals with attractive interest returns. Many sites offer loans directly to farmers, small-businessmen, startups, etc. by linking them to potential investor’s only one click away.
The sites often provide competitive interest rates which may go upto 36% (as per recent LendingTree.com data) giving extraordinary benefits to the stakeholders. However, there are also some cons that investors might face, similar to any investment methods.
Let’s deep dive into the matter of investment strategies in P2P in India.
Features
There are many unique features of the P2P investments, which are the following:-
- Technology: Investing in P2P in technology-based, so obviously it is free from intermediaries, that may reduce the potential returns. Also, it is driven by the self choices of both the investors and the buyers.
- User-friendly Interface: The process to register in these popular P2P platforms like Upstart, Lending Club, Funding Circle, LenDenClub is also easy as it only needs you to register your name, make your profile based on your strategy, and identify areas of profits.
- Returns: The returns in these platforms are also higher than that of the traditional markets, and sometimes give bonuses to the users.
- Flexibility: The applicants for loans do not have to face any if they don’t have any credit cards or portfolio other than traditional methods. They easily sort out their preferable loan from the list of offers or even break them into multiple chunks.
Risks
Though P2P investments give higher returns than that of traditional methods, it is riskier than the other methods. It started in 2005, but during Covid the maximum P2P investments were done by the platforms. Despite that, there are many reports on NPAs in the P2P methods with a number of borrowers who cannot complete the full transaction amount. With the high interests, it also becomes tough to complete the target. Also, the platform fees & other charges makes it less profitable than other transactions in this business.
Wrapping Up
The P2P method of investment is an attractive way to gain profits for investors. Giving potential returns and flexibility to choose offers, it makes it easier for the investor and the creditors. However, there are potential cases of defaults that make it risky to the investors than the traditional bank loans. So, investors have to be more conscious while deciding any factors and taking help from the app providers to get guarantee support in that cases.
