P2P lending is the new age alternative investment option for individuals looking forward to earn higher returns with smaller investment amount.
You may be trying your best to increase your financial worth. You may be working as an employee, running your own business, educating yourself, unemployed or excelling at what you do.
Whatever is your current financial situation, you may be looking forward to solutions for growing your wealth.
It narrows down to creating assets which can generate income to satisfy your requirements. The starting point should be to benchmark against certain realistic variables which can define if you are really going ahead financially.
Consumer Price Index (CPI) inflation is a benchmark that hovers around 4% in India. GDP growth is another benchmark which is in the range of 5% to 7%. With this you can figure out that an average Indian grows at a rate of around 5% on an annual basis.
You are on the right course if you are growing at higher rate for e.g. annual salary hike is let us say 10% with expenses remaining constant. If this is not the case, then you are stagnating.
Investment Choices
Once you decide to grow your wealth at a higher rate, you would think of the following main options –
| Asset Classes | Initial Investment | Risk | Returns |
| Gold | High | Medium | Medium |
| Real Estate | Very High | High | Mid-High |
| Stocks | Low | High | Potential for Very High |
| Mutual Funds | Low | High | Potential for High |
| Fixed Deposits | Low | Low | Medium |
*subjected to interpretation, but generally this is the trend
Only 5% people in India invest in the stock market or mutual funds. Lack of financial education, intricacies of stock evaluation & multitude of information makes it difficult for most of individuals to succeed with the stock market.
Real Estate requires high investment capital & long gestation period which does not fit in with the massed looking forward to buy for consumption instead of long term investment.
Fixed deposits constitute maximum share of the Indian wealth owing to natural selection as well as being seemingly guaranteed. However the after tax-returns on fixed deposits provide you real rate of return close to 5% which doubles your wealth in almost 14 years!
The advent of P2P lending
Starting off in the beginning of 2000s in UK, this concept has spread worldwide. A few such start-ups have already established themselves as a formal bank based on the success.
In India, P2P lending is still in a nascent stage but it picking up much faster with a potential to become a mainstream investment class.
P2P lending refers to a money flow between two individuals via a digital marketplace. The digital marketplace must have a NBFC-P2P license from Reserve Bank of India (RBI).
Making people act as a bank
Around 500+ million individuals in India suffer from lack of credit. These people get loans from informal sources at exorbitant interest rates as high as 100+% p.a.
P2P lending marketplace connects the borrowers looking for money with people who would like to lend money for earning interest rates.
As a lender, you register with a P2P lending platform using email ID, mobile number KYC documents etc.
You gain access to marketplace either through a web interface or a mobile app where you can choose a borrower profile to fund the requirement.
Regulatory Requirements
The maximum amount you can invest is Rs 10 Lacs across the P2P lending platforms. You should be a citizen of India, above 18 years of age with a valid PAN Card.
The minimum investment varies from platform to platform and can be as low as Rs 500.
How does this work?
This is just like shopping on amazon.
You search for particular product for example borrower profile type – salaried people looking for education loans in Mumbai.
You study the profile for the interest rate at which borrower is looking forward to take the loan. For example – 32% p.a. for medical emergency for term of 12 months
You may choose to fund either full requirement or part of the requirement. For example – loan requirement of 1 lac, you can fund INR 10000 and rest will be funded by other lenders on the platform.
You get your money back as EMIs which are credited to directly your bank account.
P2P lending platforms in India
You may check out the list of registered P2P lending companies at RBI’s website here – https://www.rbi.org.in/Scripts/BS_NBFCList.aspx
Alternatively, mentioned below are the active P2P lending platforms which you can consider for P2P Investments.
| P2P Lending Platform | Website Link |
| RupeeCircle | https://www.rupeecircle.com/ |
| Faircent | https://www.faircent.com/ |
| I2ifunding | https://www.i2ifunding.com/ |
| Finzy | https://finzy.com/ |
| LendenClub | https://www.lendenclub.com/ |
| OMLp2p | https://www.omlp2p.com/ |
| i-lend | https://www.i-lend.in/ |
| Lendbox | https://www.lendbox.in/ |
| Paisadukaan | https://www.paisadukan.com/ |
| Cashkumar | https://cashkumar.com/ |
| Peerlend | https://www.peerlend.in/ |
To know more about P2P lending – How to start with P2P lending?
