Myths And Facts About Peer-To-Peer (P2P) Investment
It is said that when people start talking about you, that means you have started doing something really great.
In the context of consumer lending, almost same is the case with Fintech initiatives like Peer-to-Peer (P2P) lending. Backed by data science, technology and cloud architecture, it is providing a much more efficient business model to provide financial services at lower costs, faster turn-around time and accurate underwriting. This reflects in the pace at which Indians have started adopting these new ways of satisfying their needs leveraging smartphones & low cost internet connectivity.
Along with business growth, there have been a lot of misconceptions, rumors and myths which we have come across while connecting with the customers. We are sure that you would be facing similar situations while considering P2P finance as an alternate investment opportunity.
To help you in gaining confidence about the concept, we have outlined below certain key myths and associated facts which can be helpful.
Myth 1: You need a lot of money to invest
Fact: When it comes to investments, we think it is only for rich people who have a lot of money to invest, but this is not true with Peer-to-Peer (P2P) investments. You can start investing with as low as INR 5000. The maximum amount you can invest is limited to INR 10 Lacs as per mandated by RBI (Reserve Bank of India).
Myth 2: P2P Investments are speculative
Truth: Mutual funds, equity shares, gold, real estate and government bonds are some frequently encountered investment options available in India. These investments offer different options of Risk-Return trade-off as well as liquidity. Some of these have low risk but very low returns while others have high returns but the risk is high as well.
Peer-to-Peer (P2P) investments offer a medium to high risk option while providing better liquidity as well as returns than most of the options cited above.
Myth 3: Long and lengthy process for making a P2P investment
Truth: You can register yourself at anytime from anywhere using an internet connected smartphone. At RupeeCircle, we have zero registration charges while providing a web interface as well as an android mobile app to invest and track your portfolio performance.
Myth 4: P2P investments do not offer liquidity
Truth: Unlike other investment options like Mutual Funds, Equity or Fixed deposits, Peer-to-Peer (P2P) investments offer various liquidity alternatives wherein you can avail monthly income from your investments.
Myth 5: P2P Investments are not a safe option
Truth: P2P companies have been notified as NBFC-P2P under section 45I (f) (iii) of the Reserve Bank of India Act, 1934 as per the gazette notification published on September 18, 2017. RBI has also announced the detailed guidelines/regulations governing P2P lending in 2017.
Myth 6: P2P investments are only for techies
Truth: Just because it is a digitally operated investment platform there is a misconception that people who are tech-savvy can only invest here. However the fact is that, if you just know how to switch on and switch off a computer you can easily use the platform without any help.
Myth 7: P2P investments offer low returns
Truth: In P2P investment the returns are much higher as compared to debt schemes and in many cases outperform mutual funds while offering double digit returns as high as 36% per annum.
In savings account you get a maximum of 5-6% which in real terms can be zero or negative if inflation is taken into account.
Myth 8: P2P investments have lengthy investment tenure
Truth: Most P2P investment options have a term of less than 3 years which is significantly better as compared to equity linked savings schemes of Mutual Funds where your money is locked for 3 years.
In P2P you can also choose for investment options with monthly cash inflow while ensuring double digit returns. At RupeeCircle, many of our customers have chosen the ‘RC Classic product’ with an average annual return of 24% with money credited monthly in their accounts.
Myth 9: You need to be an expert for investing in P2P
Truth: P2P is a simple and straightforward investment option where there are no balance sheets, P&L’s, industry reports or financial news to be scanned like equities or MFs. In case of P2P your money is provided to borrowers at agreed interest rates via an online marketplace which lists the profiles. You just need to choose the profiles which fit in your criteria and start investing.
Myth 10: P2P investments resemble gambling
Truth: In gambling sometimes you put all your money blindly without thinking about the consequences, detailed risk calculations &analytics. In case of P2P you make data backed decisions – you get a list of borrowers on the marketplace, check profiles, choose risk grades, funding amount, tenure & plan for an estimated return on investment.