5 reasons why peer to peer lending in India is great investment option for beginners

Peer to peer lending in IndiaInvesting your money is one of the most important steps that can be taken by a young individual. A right investment habit will not only help you reap rewards in immediate future but will also keep you in great shape for time to come. Peer to peer lending in India is one such investing strategy that can be followed by a young investor to generate amazing returns. Peer to peer lending in India works on the principle of social lending in which a group of lenders lend to a common borrower. These platforms operate an online platform which  acts as a marketplace borrowers and lenders. Let us look at 5 reasons why these platforms are a great investment options for a beginner

  1. Simplicity – Lending on these platforms is quite simple compared to other investment options like equities, bonds, real estate etc. an investor need not have a great technical knowledge to invest in a peer to peer lending platforms. You just need to have a cibil scorecommon sense and little smartness to generate amazing returns from these social lending sites. A common complaint from first time investors is that they are unable to decipher jargons of other investment strategies. But, with these platforms you don’t need to worry about technical stuff anymore and you can start investing with click of mouse.
  2. Start small – Unlike, other investments like gold and real estate, you can start investing in these platforms by investing a small amount in these platforms. This is an ideal scenario for a beginner. In the beginning, there is always a lack of funds available with an investor. In this scenario, Peer to peer lending in India are a great alternative for young investors.
  3. credit score rangeHigh returns – If you are looking for higher returns form your first investment then, your search should end with these platforms. These platforms can offer you returns that are unmatched with other asset classes including equities. Let us look at returns offered by all assets classes –
5 Year 10 Year 15 Year 20 Year
Equities 11 17 13.6 12.9
Bank Fixed Deposits 5.7 5.2 5.1 5.5
Gold 9 12.9 11 8.4
Real estate 8 13.4 10.8 6.2
Average Inflation 7.4 6.3 5.9 5.7

4. Liquidity – These Social lending sites also offers an added advantage of easy movement of liquidity of your funds. By investing in small amounts, you are also reducing the liquidity risk associated with your investment. In fact, these platforms offer you an advantage of spreading your investment across different different type of borrowers.Whereas, returns offered by Peer to peer lending in India are in between 18% to 25% which translates to 12% to short term investment17% post tax returns.

5. Diversification – Peer to peer lending investments are also a great tool for diversification. These investments are uncorrelated to any other investment class including equities. For a beginner, if you already have invested your hard earned money in other investment classes then, Peer to peer lending in India offer a great diversification opportunity to reduce your overall risk.