Myths And Facts About P2P Lending

Aug 9, 2022

Myths And Facts About P2P Lending

Welcome to the world of peer-to-peer lending. You might be wondering why anyone would want to get involved in a business like this.

Peer-to-peer lending is both a booming industry and an excellent means for making extra money. In fact, many people have started their own businesses by becoming P2P investors on platforms like LenDenClub, i2i Funding, or Faircent.

You may think lending without a proper institution exposes you to risk. However, lending falls under microfinancing and is now under RBI regulations.

Traditional institutions like banks do not serve a large portion of the population. People from rural areas often don’t have any kinds of formal credit records. They don’t have credit score records. Moreover, farmers and daily wage workers don’t have large amounts of capital.

As a result, traditional lending institutions don’t entertain them. Thus, micro-financing is the best way to serve this section. It opens up opportunities for both investors and borrowers.

So, when you invest through p2p lending, you become part of India’s growth story. There are many myths about peer-to-peer lending that need debunking so that everyone can benefit from it!

Who should consider lending?

You should go for this form of lending investment if diversification is your goal. Everyone knows that bank interest rates have hit a record low. Putting your money in fixed deposits is no more a profitable option.

In this scenario, lending is emerging as a great alternative. It offers decent interest rates. Moreover, lending products like Fixed Maturity Peer-to-Peer investment plan, which offers an annual yield of up to 13% over a 5-year period is a great option. A money lending app like the LenDenClub is a safe way to go forward.

How P2P lending is a great investment option

  • Myth 1: P2P lending is unsafe.

You may be wondering, “Is peer-to-peer lending really unsafe?” The answer is no. Peer-to-peer is not a scam, and many safeguards are in place to protect lenders.


P2P lending in India comes under the ambit of the Reserve Bank of India. As per the apex bank, all P2P platforms shall be registered as NBFCs. Furthermore, RBI has also increased its scrutiny over microfinancing.

As per an RBI directive, all lending via microfinancing shall be capped at Rs ₹50,00,000. The intention is to minimize lenders’ risks.

  • Myth 2: You will lose your money 

You don’t have to start with a lot of money to take advantage of lending tools. You will not lose money. It is like any other form of investment. Lenders can lose money, but they also make money. Lenders make more than they put in because of the interest that is paid on the loan.


When your money is distributed via hyper diversification, your risks are greatly mitigated. With a platform like the LenDenClub, your investment is only given to high creditworthy borrowers.

  • Myth 3: Interest rates fluctuate

The interest rate you pay on your loan is not fixed. It fluctuates with the market and can be higher or lower than . Interest rates change at any time, so it’s important to be prepared for these changes. However, there’s nothing to fear about this.

The good news is that Peer-to-Peer lenders typically offer competitive rates of interest (between 5% – 15%) so that borrowers can still get a good return on their money even if they have to wait longer.


LenDenClub’s products offer average returns of up to 10-12% p.a. With inflation at a record high of 6%, this is not a bad return on your money. Further, these are safe investments and are not linked with the market.

  • Myth 4: It’s only for the rich

There are many myths associated with peer-to-peer lending. One of the most common misconceptions is that it only works for rich people or those who have access to a lot of money.


You can create an FMPP with LenDenClub for as low as just ₹10,000/- and build up your portfolio over time. You’ll make more than you would by putting your money in a savings account — and that’s without even considering the interest payments!

  • Myth 5: No control over portfolio

The truth is that peer to peer loans are not as scary as they seem. You can use them to make money, diversify your portfolio and build a solid credit rating. Many feel that they have no control over their portfolio in lending funds.

Portfolio diversification is a well-known concept, but it’s not a new idea. With peer-to-peer lending platforms like LenDenClub available today there’s no reason why you can’t take advantage of this strategy now.


With LenDenClub, risk-diversification is embedded in their P2P lending product FMPP. The platform boasts a world-class infrastructure that capitalizes the use of AI and ML processes in its lending approaches. Once you invest your money, the AI-based interface kicks in to distribute your investments among a large pool of borrowers, sometimes as low as ₹1. This ensures that your credit risk is mitigated by way of diversification and the impact of defaults is minimal in your lending portfolio.

P2P lending with LenDenClub is a Safe Investment Aspect

Another thing people associate with P2P is high riskiness: some investors think they’ll lose all of their money if they lend out their own cash or use someone else’s assets as collateral.

You greatly reduce your risks when you go forward with a money lending app like LenDenClub.

LenDenClub is a growing platform for lenders and borrowers, registered under the RBI. It uses AI to allocate your money to creditworthy borrowers. Borrowers are verified by the credit bureau after considering a lot of factors like credit score and debt to income ratio.

Moreover, it uses a hyper-diversified model to minimize risk for money lenders. You can invest up to Rs 50,00,000. More than 20 lakh investors are lending through this platform at the moment.

The Fixed Maturity Peer to Peer investment plan delivers up to 10 to 12% per annum. It has an AI-enabled matching system, which leaves no room for defaults and mitigates risks. The platform manages risk by using all the above-mentioned techniques. From reviewing credit history to considering a borrower’s credit score, capital, and debt-to-income ratio.

Don’t fall for the myths; use P2P lending.

The truth is that peer-to-peer lending is not as scary as they seem. You can use them to make money, diversify your portfolio and build a solid credit rating.

LenDenClub is here with you in your investment journey. Sign up on the platform and take advantage of P2P lending in India.

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