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The technology, investor behavior, and investment products in the fintech space have all undergone a significant transformation in the past decade. With P2P lending at the core of new-age investment products, millennials are increasingly making a smart investment choice out of this.
Peer to peer lending is simple and efficient in generating good returns. The only requisite is you choose a well-established intermediary.
Peer-to-peer (P2P) lending investments are a terrific method to diversify your investments. Even in the landscape of rising interest rates today, P2P lending is a leading investment product.
So are you considering efficient portfolio management? Let’s start with how P2P can be a smart investment option worth considering:
How Does P2P Lending Work?
The idea of P2P lending is to connect the lenders and borrowers through online channels. A P2P intermediary does this through a website or an investment app in India. For instance, check out LenDenClub’s online portal for investments.
It’s an online marketplace for investors and borrowers to connect with each other. And create investment opportunities. Your investments can be as high as up to ₹50 lakhs. All you need to do:
- Setup your account using PAN number,
- Provide your personal information that the sign-up process takes you through
- Invest!
It’s that simple!
Technically, P2P lenders differ from traditional banks in quite a few ways
- P2P lenders are intermediaries that facilitate lending between investors and borrowers. In the case of banks, they are the borrowers themselves. They raise their funding through investment products such as current/savings accounts, fixed-deposits, etc.
- P2P lenders can reduce overhead costs. That’s because of tech-based processes built on analytics and data-driven models. Traditional banks find this challenging to provide or are only starting to adopt in India.
- In contrast to traditional banks, these platforms can pass on the advantages to the final consumer. This allows lenders to earn better returns and borrowers to borrow money at cheaper interest rates.
- The monthly payments or transactions between the lender and the borrower are not subject to a margin by the platforms. Instead, they bill both parties for the services rendered.
So how does P2P help in Diversifying Your Portfolio?
Earlier, when it came to investing, people mostly turned towards conventional savings and FDs or real estate investment. But with digitalization came the need to look for a new-age alternative solution. The reason was to diversify their portfolios and achieve high and consistent returns. This led to the introduction of P2P lending as an alternative smart investment form. So when P2P is now mainstream, listed below are some of the factors that shows how P2P helps in diversifying your portfolio:
Small Ticket Size
There’s no need for significant capital to begin developing your P2P lending portfolio. A new investor can start with reasonable amounts and raise the size of their portfolio overtime, thanks to the availability of small investment ticket sizes.
Compounded Returns
P2P lending with LenDenClub as your partner allows you to generate sound returns of up to 12% p.a. You have the complete freedom to choose the time-frame for your investments with a maximum of up to 5 years. You invest your money today, and it stays invested throughout your invested time-frame without you having to do anything. Longer tenures helps you reduce the hassles of reinvesting your amounts over and over again while you reap the benefits of compounding on your investments.
Low volatility
With LenDenClub, P2P lending is fully AI based. Once you decide the amount you need to invest, LenDenClub makes the placements of such funds on your behalf. Such processes ensure that your risk is mitigated and you don’t see large fluctuations in your investments. It is unlike any other market-linked investments. MFs and equities or even real estate see wild swings in prices that depend on the market’s performance.
Ease of investment
P2P lending is completely online. The entire process is paperless. That is, from identifying potential borrowers who meet your criteria and concluding binding contracts to receiving repayments.
LenDenClub manages your P2P lending activity. All transactions are performed through an escrow account held under third-party trusteeship.
Higher control over investment
Default risk is the greatest risk associated with peer-to-peer lending. Yet, LenDenClub is able to mitigate this risk by creating small buckets of investments. The platform’s state-of-the-art technology pools funds from different investors to lend to a single borrower. This lets them reduce the default risk. Lenders can easily check borrower profiles giving them higher control over their investments.
The P2P platform enforces checks such as thorough borrower evaluation to ensure only the most genuine loans are selected.
Ensuring legal agreement between both parties, 200-Point borrower creditworthiness check, enabling a strategic collection, recovery mechanism, etc are some of the steps laid out by LenDenClub to emerge as India’s trusted investment partner.
Bottom Line
P2P lending is a method of releasing individual credit supply creating an alternative source of investment for the investors. These platform helps you to earn significantly higher returns on your investment when compared with traditional investment products.
peer 2 peer loans are comparable to getting a loan from a bank and paying it back over time only that, now you act as a bank that lends the money. Thus, knowing how to apply to a marketplace, selecting the required amount and time frame for investment, and also comprehending the terms and conditions before investing is crucial for investors.
So are you tired of witnessing lower than expected returns from your existing portfolio? Well, it’s time you looked at new-age advanced investment products. One that helps you diversify your portfolio while allowing you to generate high returns at the same time. Join our community of 2 million investors today!
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