10 Reasons To Become A P2P Investor
The first half of 2019 is almost over and the second half will be gone before you know it. And for investors it’s that time of the year when they rejig and reanalyse their portfolio. And also the time the calculators come out to estimate the returns on investments. It’s also the time many ponder whether they have made the right investment decision and whether it’s time to take a risk or try out some newer avenues.
When it comes to newer investment avenue, look no further than P2P lending. It is a critical investment avenue suitable for amateurs as well as experts. Investors can also be a part of social investment through P2P lending and drive financial inclusion. Besides its novelty, P2P lending also offers many other benefits and if you are a new investor on the P2P space then here are a few reasons you must definitely invest in it.
Reasons to be a P2P lender
- High Returns
The primary concern of any investor is the return on his/her investment. Keeping your money idle in some low yielding financial vehicle is as good as losing your money. Peer to peer lending offers the investor high returns in less time. And P2P lending does not just give you more returns than a fixed deposit but it also has the potential to deliver higher returns that certain mutual funds. On an average P2P lending can give investors an annual return of up to 24%.
- Monthly payments
P2P lending is an investment model that gives monthly payments in the form of EMIs given by the borrowers. And it starts immediately from the subsequent month of investment. Unlike many other investment vehicles wherein your money is locked in for a predetermined period of time, P2P gives you returns immediately that you can opt to reinvest in the platform.
- Strict credit underwriting
When a borrower first applies for a P2P loan he/she has to undergo strict background checks. RupeeCircle checks the financial and social background to evaluate the loan repayment capacity and intent of the borrower. Several other parameters (salary details, spending habits, lifestyle habits, etc.) are also considered before the borrower is assigned a risk category. The interest rate payable by a riskier borrower is higher than that paid by the less risky ones, and the investor can choose to fund money based on this risk profile.
All the borrowers are listed on the P2P marketplace with details of their loan requirements (risk category, purpose of loan, etc.). The investor can choose to fund several borrowers at the same time.
There are several borrowers listed in the marketplace and the investor can choose (and are advised) to fund different borrowers from different risk categories. Doing so mitigates the risk associated with a lone borrower defaulting.
- Passive income
P2P lending is the most convenient way of earning a passive income as the investor can withdraw the money on a monthly basis. P2P platforms give its investors the option to either reinvest their monthly return or transfer it to their bank account. Those looking for a passive income can opt to transfer the money received to their bank accounts.
- Compounding through reinvestment
As mentioned earlier, the monthly instalments (interest + principal) received by the investor can be reinvested in other loans in the marketplace. This makes P2P an excellent investment choice as the reinvestment does not incur any additional charges on the investor and increases the returns over time due to compounding.
- Low investment amount
Investment in a P2P lending firm such as RupeeCircle can be done with an amount as low as Rs5,000. Unlike SIPs you need not keep investing on a monthly basis, instead you can only choose to add money into it as per your convenience.
- Secondary market facility
If you are an active investor in RupeeCircle you have the additional benefit of selling your investment in the secondary market and exit early.
- P2P is long term
The need for personal loans will never diminish. Many large banks and financial organisations reject the applications of borrowers simply based on their credit score, whereas P2P companies offers loans to even those with low credit score (after checking other parameters). And P2P is just getting started. So the time to enter the P2P industry is now.
- Ordinary tax
The taxation rules are favourable for the investors who get an Investor Investment Certificate to file their returns.
P2P Lending is not just for the astute investor, it is also the perfect avenue for young investors due to its high returns, less risk and long term ramification in the investment market.