Giving investors an attractive opportunity to put a part of their fixed-income portfolio into something where they can yield more profit compared to other alternatives, peer to peer lending has been emerging as a better option for financiers. Commonly referred to as ‘marketplace lending’, this platform establishes connection between the providers of capital and the borrowers who need the credit. These platforms such as Lendbox act as a third party between the borrower and the lender and make the whole process of getting the credit easier and less painful.
Also read : 6 Reasons why you're not getting good returns on your investments
A piece of a portfolio in P2P lending makes sense for a wide range of investors as it is not correlated with other kinds of fixed-income products, it's a monthly yield merchandise and in certain markets, it is reasonably liquid. So, proper investors who diversify their investments across the platforms in many low grades get comparatively higher yields and consistent returns. Also, as the loans are paid back, the investors have cash building up in their accounts simultaneously, which they can reinvest into additional loans and continue to build and diversify their portfolio.
The peer-to-peer platforms emerged after the traditional banks, post 2007-2009 financial crisis, failed to provide credit to the borrowers and the low-interest rates left investors searching for higher-profitable assets. The marriage of interests of the credit seeking borrowers and the lenders has helped the P2P platforms proliferate. This platform gives the investor a chance to bid his/her money into the portfolio of a lender he feels reliable and confident about. The loan applications presented to the investors include the credit score, annual income and the reason for applying for loan of the borrower. Also the investors are given the facility to question the applicants through a message system.
By funding a loan as an investor through a P2P platform, you get to play in a space where you are getting returns higher than you might get through corporate bonds. The investors bid on the applicants they find most compelling and which have a good credit score. However, this platform is still not well known in third world countries and is in its nascent age. As this fairly new platform will proliferate in India, it will surely attract more investors to bid their money in different portfolios of lenders.
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Also read : 6 Reasons why you're not getting good returns on your investments
A piece of a portfolio in P2P lending makes sense for a wide range of investors as it is not correlated with other kinds of fixed-income products, it's a monthly yield merchandise and in certain markets, it is reasonably liquid. So, proper investors who diversify their investments across the platforms in many low grades get comparatively higher yields and consistent returns. Also, as the loans are paid back, the investors have cash building up in their accounts simultaneously, which they can reinvest into additional loans and continue to build and diversify their portfolio.
The peer-to-peer platforms emerged after the traditional banks, post 2007-2009 financial crisis, failed to provide credit to the borrowers and the low-interest rates left investors searching for higher-profitable assets. The marriage of interests of the credit seeking borrowers and the lenders has helped the P2P platforms proliferate. This platform gives the investor a chance to bid his/her money into the portfolio of a lender he feels reliable and confident about. The loan applications presented to the investors include the credit score, annual income and the reason for applying for loan of the borrower. Also the investors are given the facility to question the applicants through a message system.
By funding a loan as an investor through a P2P platform, you get to play in a space where you are getting returns higher than you might get through corporate bonds. The investors bid on the applicants they find most compelling and which have a good credit score. However, this platform is still not well known in third world countries and is in its nascent age. As this fairly new platform will proliferate in India, it will surely attract more investors to bid their money in different portfolios of lenders.
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