How P2P platforms enable income generation through higher return

P2P or Peer to Peer lending is a debt financing mechanism that connects individuals and businesses in need of credit with people who are willing to lend at a digital marketplace.

Peer to Peer lending, P2P platforms, debt financing, income generation, higher return, digital marketplace
P2P lending has emerged as an alternative to traditional bank lending.

By Rajat Gandhi, Founder & CEO, Faircent.com

P2P or Peer to Peer lending is a debt financing mechanism that connects individuals and businesses in need of credit with people who are willing to lend at a digital marketplace. P2P lending has emerged as an alternative to traditional bank lending, enabling investors to earn returns on their investment and borrowers to get quick low-cost credit because of the lack of intermediary costs.

How does P2P lending work?

There are numerous digital platforms and marketplaces that enable P2P lending. It is a simple process where a lender starts an account with the platform and transfers the money they want to invest in the form of loans to their escrow account. Similarly, the borrower registers on the platform with financial and personal information to avail the loan.

How do P2P lending platforms enable superior returns?

In today’s time, there are numerous investment opportunities but how do P2P lending platforms enable superior returns? Once the lender has given the money to the borrower, from the next month on, they begin to receive the money every month in the form of EMIs from the borrower. It includes the principal amount and the interest. However, to earn higher and more stable returns, lenders must build a diversified portfolio. Thus, they must choose a platform that offers multiple loans and loan products or helps them diversify through portfolio management done using scientific data analysis.

Investment decisions and choices that can lead to higher returns –

Reinvestment

Reinvestment is one of the options to maximize your investment. The money earned through the interest on investment every month can be reinvested. The lender can either withdraw it or reinvest in other loans. Additionally, the reinvestment comes without the requirement of spending any extra time on allocating those funds towards different investments. When a person adopts to activate the reinvestment, their monthly earnings are reinvested in similar products or plans, which continue to generate returns.

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Automated Investment

Automated investment options offered by the P2P lending platforms enable individuals to manage their portfolios without putting in any time and effort. Lenders don’t have to study and select every borrower profile. Instead, they can divert funds to auto-invest wherein the platform’s algorithm automatically finds borrower profiles that match their investment goals. It is one of the most efficient and least time-consuming processes of investing.

Systematic Portfolio Management

Another efficient way to earn extra returns is the systematic portfolio management products. Here investors pool their money in a single portfolio. Furthermore, the platform deploys data science and analytics to build and manage portfolios with the potential of delivering high and stable returns. All investors have to do is add the money to their account and permit the platform to allocate the funds. The algorithm will allocate funds to different loans and products with a higher capacity to provide higher aggregate returns.

Conclusion

P2P platforms like Faircent are today offering a plethora of options to the discerning investor – various plans with different tenures and payout options. These allow lenders to find a match in terms of returns and liquidity when it comes to their investment objectives. There are different plans – from those that offer high returns like up to 12 per cent with a 12 months lock-in to much more flexible plans like those where funds can be withdrawn within 24 hours.

Simple online, contactless processes ensure seamless income generation for the lender and access to low-cost instant credit to the borrower. P2P lending is emerging as an ideal investment opportunity, wherein people can invest without worrying about the market risk in other investment options.

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