Even as global markets go shaky and experience volatility making many sweat; it is the Online Direct Lending zone of peer-to-peer finance that not only remains unfazed, but seems all set to offer some dramatically interesting, money-making opportunities even for those who do not have knowledge of the stock market.
Peer to peer lending has emerged at a time when the conventional financial system is undergoing a crisis across the world. One may call it a variant of crowdsourcing, P2P services are increasingly becoming popular in all countries where they have been introduced. Here are some reasons for its popularity and why you should also consider it:
In the US and UK, a recent popular trend is paying credit card dues via P2P borrowing. It may seem a bit odd for starters, as credit cards with their different offers seem to be the most lucrative credit offering. But swapping it to P2P makes lot of economic sense.
Peer-to-peer lending hit the headlines in early December when former Citigroup CEO Vikram Pandit invested in Orchard, a New York City-based startup that aims to create a secondary market for P2P loans.
Any kind of a organized financial model of borrowing and lending essentially has to keep three factors in mind; (i) efficient but low-cost running of the institution, (ii) a healthy balance of depositors and borrowers with lower chances of maturity mismatch and (iii) addressing the issues of faith (perceptions of risk, trust, timely repayment etc) of the targeted clientele to ensure steady business over time.
We may be critical about the high interest rates of the banking sector in India, but the Net Interest Margin (NIM) of banks has actually weakened ever since the crisis. NIM is a measure of the profitability of a bank and is calculated as the ratio between difference in the interest income earned on loan advances and average earning assets of the bank, and the amount of interest paid to depositors.
Do you have money lying idle in your bank account? It will earn a piffling 4%, perhaps even 6%, in a year. Put it in a fixed deposit or a debt fund and you can earn 9-9.5%. But given the high inflation, the real rate of such investments is barely above the zero mark.
