Well, P2P loans is an innovative way to invest your surplus money and earn monthly cash flow. But the lending and borrowing eco system comes with the risk of default. 
Here’s a list of five things you should know before planning to lend on P2P. 

1. Start Small

“One should put part of his portfolio in P2P lending. I would recommend everyone to lend small (over a period of 3-6 months) and diversify among various borrowers,” says Rajat Gandhi, Founder & CEO, Faircent. 

2. Diversification is the key

“One should have at least 100 borrowers in one portfolio. Also, invest the money every month instead of putting everything in lump sum. There could be good borrowers coming every month. Don’t get greedy just because you see a higher interest rate (30 percent returns) in a portfolio. It will have a higher risk,” says Gandhi of Faircent. 

3. Always Check the Borrower Profile

Some of the P2P platforms boast of stringent criteria for selecting the borrowers in order to control defaults. “Out of 40,000 applications received, hardly 1,500-2,000 people go live on the site post the verification,” adds Gandhi. 

4. Always check the default rate

“One needs to check the default rate as well as the risk rating while choosing the borrower,” says Gandhi of Faircent. 

5. Keep Older Company

In a fast growing sector like P2P lending, companies with RBI licences may have an extra edge over the newer players. 

Click here to read the full story: https://economictimes.indiatimes.com/wealth/p2p/five-things-you-should-know-before-lending-on-p2p-platform/articleshow/65484406.cms?adcode=P2P