Peer-to-peer lending is widely accepted as an important asset class that offers investors an ideal opportunity to increase their investment portfolio’s risk-adjusted returns. In India, P2P lending has been regulated by the RBI and recognized as an NBFC-P2P.

Here is a list of 5 advantages that make investing in P2P lending irresistible:

1. An Opportunity to Earn like a Bank: Lending is one of the oldest professions, unaffected by economic downturn as it is linked to consumption of essential commodities and services like medical emergency, home repairs, vehicle purchase, business expansion etc. Previously, earning by lending was an asset class only accessible to banks. With peer-to-peer lending, retail investors can also take advantage of the same by lending their surplus funds directly to borrowers and earning higher returns by removing intermediary margins.
2. Attractive Returns: Majority of P2P lenders on the Faircent platform have consistently earned returns of more than 18% p.a. after adjusting against potential default.
3. Monthly income/Compounding Returns: Lenders not only receive regular monthly income from repayments made by borrowers but can also choose to reinvest the same and take advantage of compounding returns.
4. Diversification of Investment portfolio: As a fixed-income asset with moderate to low risk and higher returns when compared to other market-linked investments, P2P lending offers investors an opportunity to diversify their investment portfolio and protect it from market fluctuations.
5. Ease of Use/Transparency: Faircent.com, has a clear fee structure and no hidden costs/commissions. Relevant data pertaining to borrowers is available to lenders on their dashboard enabling them to take informed decisions. Simple tech-based and online processes, various tools, calculators, data analytics and loan products help lenders to easily and efficiently invest on the platform.

P2P lending platforms connect and facilitate smooth transactions between borrowers and lenders. They act as an online lending exchange similar to a stock market. Investing in P2P loans can be compared to other market-linked investments. Like stocks, P2P loans is a fixed-income asset with predictable returns. However, P2P returns are more stable, protected from day-to-day market fluctuations. Also, unlike other similar investments, with a peer-to-peer loan, lenders are more in control as they can set their investment criteria as per their risk-appetite.

P2P lending is a modern tech-based financial model that challenges established but non-inclusive banking practices and has managed to keep operating costs and expenses low. By passing the intermediary margins on to the end users, peer-to-peer lending ensures that its lenders earn better returns and borrowers access faster credit at lower costs. In short, peer-to-peer lending should be considered as a way to diversify and strengthen your investment portfolio.