Peer to peer lending has been growing in popularity for several years due to the number of benefits it offers to investors and borrowers. It works as a great alternative to traditional investment options. There are a number of investors who are lending money to potential borrowers through online platforms and earning high returns. However, there are also people who are doubtful about p2p lending and think this type of lending carries high risks. You can compare p2p lending with other conventional investments to find whether it makes sense to invest in peer-to-peer loans or not.
P2p lending platforms bring lenders and potential borrowers to the same platform and solve two problems.
- P2p platforms offer high returns to investors compared to saving accounts.
- It helps borrowers to get quick funds and fulfill their current financial needs.
It is the most common question whether you should invest in p2p lending or not. To find the answer, here we are comparing p2p lending with other investment alternatives.
Peer To Peer Lending Vs Crowdfunding
Many people think that p2p lending and crowdfunding are the same things. It is because there are many similarities among them. In both p2p lending and crowdfunding, investors lend money to the borrowers. However, in crowdfunding, money is raised to fund a project, and in return, investors sometimes receive a share in profit and sometimes a product. Whereas in p2p lending, investors invest money in p2p loans with a goal of earning high returns on investment in the form of interest. In crowdfunding, we can not talk about the percentage of returns, and it depends on the progress of the project you are funding.
P2p Lending Vs Bank Savings
Bank saving accounts offer a low interest rate. If you put your money in savings accounts for a large amount of time, you will lose money to inflation because the cost of living is increasing day by day. However, if you put your money in a savings account for a short time, it can make sense. It is better to invest your money instead of keeping it in savings accounts. You can invest in p2p lending and can enjoy the benefits of compounding interest.
P2p Lending VS Crypto Lending
Crypto lending is similar to p2p lending, but the only difference is that in crypto lending, crypto assets are used as collateral. And the interest rate in such lending is lower than the traditional p2p lending. However, due to the presence of collateral, crypto lending is much safer than p2p lending. Investors avoid investing in crypto lending because a number of people still distrust cryptocurrency.
P2p Lending Vs Real Estate Investment
There are many ways to invest in real estate, and also there are many types of real estate deals. When we compare p2p lending with real estate crowdfunding, we can see that p2p lending comes with high returns that are least fluctuated by changes in the market. In Real estate funding, you can receive 3 to 7% returns, while in p2 lending, you can even get 10 to 15% returns. However, keep in mind that real estate funding comes with lower risk. In this case, if a borrower defaults, you have an underlying property that you can sell to get your money back.
P2p Lending Vs Stocks
If we compare the returns from stocks with returns of p2p lending, we can see that p2p lending offers high returns. If you want to earn high returns from stocks, you have to lock your money for a long time. On the other hand, if you want to start earning right away, you should choose p2p lending.
P2p Lending VS Company Bonds
Investing in company bonds is always risky because when you purchase company bonds, you are directly investing in the company. If the company goes out of business, you can lose all your money. Other than that, the returns on bonds are also not attractive, and it ranges from 3.5 to 7%. If you are willing to take the risk, it is better to invest in p2p lending so that you can earn high return rates compared to company bonds.
Bank saving accounts, stock, bonds, and crowdfunding are more popular investment options among investors. However, if you want to earn high-interest rates, you should go for peer to peer lending. You should look beyond high interest rates and consider risks associated with them so that you can take measures to mitigate risks and earn more profit.