The difficulty in obtaining credit in the market and the high interest rates charged contributed to the development of the p2p platform — a kind of uncomplicated collective loan that is becoming successful worldwide. Quite different from traditional modalities, it is a bet for the future. Also known as peer-to-peer lending, this lending modality virtually connects investors, individuals and small or medium-sized entrepreneurs seeking working capital, financing for purchasing stock, or exchanging debt.
Is P2P Lending Worth It?
Yes, p2p lending is worthwhile because the entrepreneur pays lower fees and interest. Transactions made by this system work more transparently and objectively, being less bureaucratic. They are also decentralized and allow investors to encourage the growth of local companies and businesses. Anyone looking for new investment alternatives must have come across the term peer-to-peer lending for sure. P2P lending works simply. We have listed the main advantages of peer-to-peer lending below so you can understand why you need to start investing in this application right now.
Better relationship between risk and return
Every investor seeks the same thing — the highest and safest return for their money. However, the risk/return graph of the most common applications follows a straight line. It means that those that have a high return have an increased risk at the same time. P2P lending applications have excellent returns. The company responsible for the platform controls the risk, selecting solid entrepreneurs who go through a rigorous selection process.
Monthly income
Another disadvantage of better-known investments, such as the stock exchange, is that there is no monthly income. In other words, investors only earn money when they sell their shares or when companies distribute dividends, which does not happen more than twice a year. P2P lending allows the investor to have a monthly income, as the entrepreneurs make the payment of the borrowed money every month.
There is no administration fee.
The vast majority of investments must be made through a brokerage firm, which charges a service fee for each trade made. It means that if you have 10 thousand dollars to invest, a percentage of that amount will go to their coffers. Peer-to-peer lending is done through an easy-to-use online platform where no service or administration fee is charged. In other words, the same 10,000 dollars here are fully converted into investment.
Total mastery of investment
The P2P lending platform offers all the necessary foundations for investors to know exactly where they are putting their money. It is possible to have access to all the data of the chosen companies and periodic reports on their performance. Added to this, it allows you to optimize the diversification of your portfolio, investing in companies from different sectors of the economy, thus ensuring less exposure to market fluctuations. Without a doubt, peer-to-peer lending is a controlled and profitable way to spend your money. Nevertheless, ensure that you choose a solid, quality online platform.
Less bureaucracy and utterly online process
The P2P loan has the main advantage of being a model in which people invest in people or companies. In other words, there is no need for intermediation by a bank for the operation to take place. As a result, the interest rates involved are lower than those applied to traditional loans are. Other benefits of the P2P loan are the convenience of carrying out the entire process 100% online and the significant reduction of bureaucracy involved in conventional credit taking. Therefore, this type of loan has been helping entrepreneurs who need resources to make their business activities viable. This type of credit or peer-to-peer loan is usually offered as an online loan, being provided by p2p lending platforms.
Understand how to get a peer-to-peer loan
Starting a company, business or project is challenging. That is because getting start-up capital or investors is an arduous task. If you are looking for credit, the p2p loan can help you right now. The p2p loan works almost like a common type of loan, but with some differences. The borrower needs to register on the p2p platform, informing the required data to apply for credit. Then, the system performs a risk analysis to measure the probability that the borrower will default. Find potential lenders and investors. Keep an eye on interest rates and the total effective cost of borrowing.
If you are an investor with the potential to manage a part of the business, ask for a possible partnership. Take this loan only after analyzing other offers of credit checks. If approved, the request is published on the platform, together with the risk rating. It makes the request accessible to investors, who can choose the best option for investing their capital, considering the risk x profitability ratio. When the amount requested by the borrower is financed, the borrower will then have an obligation to pay off monthly instalments.
Conclusion
To understand how the p2p loan works, it is necessary to know that it is a type of credit or collective loan and even a kind of investment. It is interesting to note that P2P Loans are technically a fixed-income investment, as investors know exactly how much they will receive per month at the time of the loan.
However, there are platforms where beneficiaries can set the interest rate they are willing to pay and are matched to the appropriate loan agreement through a kind of reverse auction. Before making an investment or request, keep in mind that there are other ways to raise capital for your project.
Also read — Data-analytics: more than a word, a modern weapon favours companies’ growth.
