Why is Peer to Peer Lending Better Than Other Investment Assets?

Aug 31, 2017

Peer-to-peer lending in India is often compared to real estate and the stock market. The truth is that P2P lending offers better and balanced risk return as compared to the other two.

Peer-to-peer lending in India is a newly emerging investment concept. It is suited to a specific set of investors and has its own risk-return parameters. However, if the comparison is to be made, it could be evaluated against real estate and stock market investment.

Real Estate

If you have a huge/additional capital to spare and have a long-term horizon, it makes sense to invest in property, or else it could be a dead investment. When the realty sector goes up, there will be capital appreciation. However, if it plunges southward, there is a huge risk involved. It’s also not so easy to sell a property. You can earn a monthly income after renting it, but it will take several years to recover the investment cost. Moreover, the longer you keep the property, the more it adds to the renovation cost as well.

Stock Market

The stock market is a good option when considering diversification in the portfolio. Depending on your risk appetite and investment goals, you can invest directly in the shares or through mutual funds. However, like real estate, stock market investment also requires you to keep a long-term horizon. The profits are linked to stock market performance, so the fluctuations in the returns are higher. You need to follow the market news and monitor your investment closely, a disadvantage for an amateur investor. Find out why investing in P2P lending is better than investing in the share market click here.

Peer to Peer Lending

Peer to peer lending in India is becoming popular among those looking for newer investment avenues. Compared to the stock market or real estate, it offers balanced risk and returns. Basically, you can become a personal loan lender through peer-to-peer lending. There are several online peer-to-peer lending platforms, such as LenDenClub, where you can lend money online. The risk and return are in your hands because you can choose the borrowers you want to lend money online and at what interest rate. The average returns are about 25% with zero volatility risk. The cash flow is not tied to maturity and starts immediately after the investment. So, it gives regular income, which real estate or stock market cannot. Also, most P2P lending platforms have a lender protection policy to safeguard investors from defaults. You can start investing for as low as Rs10,000, so even small investors can explore this option.

In a nutshell, in peer-to-peer lending, you know for certain what you are getting into.

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