It can take 26 years to pay your credit card debt: Have $20,000 in credit card debt? Plan to fund just the minimum monthly repayment? I hope you are comfortable, because it will be a 26 year ride before you pay off that amount. You’ll also end up repaying over $65,500 in principle and interest for your troubles. P2P lending can help pay down credit card debt, or act as an alternative source to borrow money from the beginning.
Completely anonymous: Borrowers can list their loan applications and borrow money anonymously. Your personal details are never shown to the P2P lending community. Sometimes it really is better to just be a number.
No prepayment fees: Aren’t Repayment fees when you borrow money enough? Typically traditional platforms charge you 3% for or more for paying your debt off early. Why charge for prudent behavior? With P2P borrowing, it’s your loan, and if you want to pay it off early, that is up to you.
24/7 platform: You do not need to run to wait in long lines, nor will the P2P marketplace close after the 9 – 5 day is over. Loans can be listed on the platform in less than a day and you can borrow money from the comfort of your home.
You are unique: Many alternatives to P2P lending tends to adopt a blanket approach, charging exorbitant interest rates to everyone. P2P lending allows each individual looking to borrow money to seek funding from lenders who are comfortable with their level of risk profile, on a case by case basis.
Your money is safe: The P2P marketplace facilitates the interaction between borrowers and lenders. It does not handle your funds. Your money is handled by an independent, licensed third party (a Trustee) who is responsible for holding and transferring funds.
Loans are a straightforward financial transaction: This is not some fancy, derivative based alternative finance. This is the easiest way to borrow money. P2P lending simply modernizes interactions by linking the same lenders that were always there to those looking to borrow money.
Diversity beyond stocks and bonds: P2P lending has different characteristics to stocks and bonds and can help to further diversity your portfolio to reduce risk. Don’t keep all your eggs in one basket.
Spread loan among many borrowers – Fractionalize your lending: You don’t have to pour all your funds towards a single person looking to borrow money. Fractionalize your loans in P2P lending by investing in small increments across a variety of borrowers to further reduce risk.
Don’t leave your money idle earning 0%: P2P lending earns annual return rates of between 7 to 25% on average in the current rates climate, instead of insignificant returns in a saving account.
Author: Shehreyar Jamshed, CFA
Disclaimer: The information in this communication has been prepared without taking into account your objectives, financial situation or needs. As such, it should not be construed as investment advice, nor an opinion on the appropriateness of peer-to-peer lending or alternatives for you. All investment and borrowing decisions should be made individually in regard to your own objectives.