P2P lending vs Fixed Deposits

credit scoreFixed deposits are considered as one of the safest investment options that generates returns greater than a normal savings account. Usually, a Fixed Deposit generates a return of 7-8% depending on tenure. It is one of the most popular investment options for Indians along with Post office schemes. One of the strongest attractions for Fixed Deposits has been guaranteed returns which are not available in many other investment options.

But, fixed deposits have faced strong competitions from other investment options like Stocks, Debts, Mutual funds, Gold etc. These assets usually offer a return that is greater than Fixed Deposits but with caveat attached to them i.e. at higher risk. Stocks can give you a tremendous return over the time but you should be more than willing to take extra punt with you money to earn that return.cibil score

A recent practice of Peer to peer lending has taken place in Indian lending industry. P2P lending is already a huge thing European market but slowly and gradually it is getting pace in India. It revolves around the concept of social lending. In social lending just like crowd funding a group of individuals fund a borrower without the presence of a financial intermediary like Banks. In Developing market like India a large chunk of population is currently unbanked. Banks usually don’t entertain a customer who doesn’t fall in existing criteria for banking. This rigidity in Banking has credit score rangeresulted in huge opening for Peer to peer lending in India. It is just not beneficial from a borrower’s point of view but it can generate returns that cannot be generated by other investment vehicles like Fixed Deposits.

LoanKuber has prepared a following set of points on why Peer to peer lending is better compared to fixed deposits –

  1.       Returns – A investment in Fixed Deposits will generate a return in range of 6-8% but with P2P lending you can easily generate a return of 18-24% on your investment.
  2.       Diversification – An investment in P2P lending acts as better diversification option then Fixed Deposits.loan against GPA property
  3.       Interest Rate risk – Fixed Deposits have an inherent risk of interest rates fluctuation. Fixed Deposits rate changes over time in sync with bank rates but income from P2P lending doesn’t changes with interest rates.
  4.       Investment at your own terms – Here you can invest on a borrower of your choice. You can cherry pick a borrower to match your expected return,
  5.       Portfolio creation – It is a holistic investment in itself as it allows you to create portfolio of investments for different borrowers of different risks. You can invest in high risk/high return borrowers as well as low risk/ low return borrower to create perfect portfolio. In Fixed deposit your risk and return profile doesn’t changes as pep2p lendingr your expectations.
  6.       Early mover’s advantage – P2P lending is in nascent stage in India. You can take advantage of it to generate amazing returns through P2P lending.

We at LoanKuber can safely say that Peer to peer lending is the next big thing in Indian lending Industry. It will disrupt Lending Industry in a same way as “Whatsapp” disrupted Messaging and Mail services. With new guidelines for P2P lending expected soon, you can expect a exponential growth in lending space. If you want to join this band wagon and generate amazing returns that are unmatched by other assets classes then you should invest as lender in new age P2P lending platforms like LoanKuber.