How profitable is peer-to-peer lending for investors? | News | Warwick Business School (2024)

FAQs

How profitable is peer-to-peer lending for investors? | News | Warwick Business School? ›

The research revealed that the newly developed framework of general characteristics-based portfolio policies (GCPP) can achieve an average rate of return of 8.86 to 13.08 per cent each year in an extensive data set of online loans collected from peer-to-peer (P2P) platform

This means a solid portfolio of P2P loans can generate a steady stream of passive income. Higher Yields – Without question, the single most attractive aspect of P2P lending for investors is the potential for higher yields. A carefully curated portfolio of loans can potentially earn 10% annually or better.

Advantages and Disadvantages of Peer-to-Peer Lending

Peer-to-peer lending provides some significant advantages to both borrowers and lenders: Higher returns to the investors: P2P lending generally provides higher returns to the investors relative to other types of investments.

Lenders for P2P loans may be enticed by the high returns they can make compared to other investing options. Typical returns for P2P investors per year average at about 5 percent to 9 percent while some investors see 10 percent or more returns.

Peer-to-peer lending offers businesses quick access to capital, lower interest rates, and a streamlined application process. Peer-to-peer (P2P) lending is a modern financing method that allows businesses to borrow money directly from individual investors, bypassing traditional financial institutions like banks.

For instance, trading USDT in USD across different exchanges simplifies the process and allows you to concentrate your resources more effectively. In conclusion, P2P trading across exchanges presents a lucrative opportunity for individuals looking to maximize their profits in the cryptocurrency market.

P2P lending is also an effective choice for business owners seeking a loan. The process of lending through p2p lending apps is far faster than applying through a bank, and you might get your funds within a week of approval.

Peer-to-peer lending often offers lower interest rates and more competitive fees, but also carries higher investment risks compared to traditional lending and charges fees to both borrowers and lenders.

What are the returns of peer to peer investing? ›

On an average, we have consistently generated risk adjusted returns of 11% to 18% (annually) for our lenders depending upon their capital allocation in risk categories.

Peer-to-peer lending can offer some eye-catching returns, but it is not without risk and unlike high street savings accounts your money is not protected by the Government if anything goes wrong.

LendingClub is a peer-to-peer—or marketplace—lender founded in 2007. As the largest online lending platform for personal loans, LendingClub has worked with over 3 million customers and funded more than $55 billion in loans.

As with any high-return investments, there are risks with P2P lending. Default rates tend to be high with this class of loans, which can lead to losses for investors. Fees charged by the platforms may eat into any potential returns as well.

The main peer-to-peer lending risks are: Yourself (psychological risk). Not enough diversification (concentration risk). Losing money due to bad debts (credit risk).

Other forms of peer-to-peer lending include student loans, commercial and real estate loans, payday loans, as well as secured business loans, leasing, and factoring.

Peer-to-peer lending (P2P) is a way for people to lend money to individuals or businesses. You – as the lender – receive interest and you get your money back when the loan is repaid. But P2P lending can be much riskier than a savings account.

Start with 50k to 2 lacs depending on your risk appetite and steadily build your portfolio. A long-term investment plan of at least 24 to 36 months is the best way to get good returns with P2P lending as the returns compound with time, increasing the return on investment.

Is P2P lending safe? Peer-to-peer lending is riskier than a savings account or certificate of deposit, but the interest rates are much higher. This is because those who invest in a peer-to-peer lending site assume most of the risk that banks or other financial institutions normally assume.