How Technology Has Started a Revolution in the Form of Peer-to-Peer Lending
With the advancement of technology, there is a rise in the demand for tech-enabled and simplified services across diverse industries. The emergence of financial technology or Fintech in the banking sector is pushing traditional banks to constantly update, adopt, and upgrade themselves to a more technology-based and consumer-centric approach.
The banking sector has always been known for its lower degree of engagement and differentiation. It has been the slowest to evolve and change with the times. This has often left customers exasperated and flustered by the complex banking process. Contrary to this, the advent of cutting-edge technologies, evolving customer expectations, stricter regulations, and emerging business models are compelling traditional banks to catch up with the latest technology in this dynamic and ever-changing digital era.
The time-consuming or rigid procedures of conventional banks and the spurt in technology together have led to the emergence of an industry that has gained tremendous traction in the last few years. Today, thanks to the technological revolution Peer-to-Peer lending industry has become a reality and a viable alternative to traditional bank loans. In the last few years, it has emerged as the competitor to the conventional banking system.
As per https://www.finder.com, in the United States, P2P lending has certainly a robust decade-long history even though it may be a relatively new concept to some. It is a modern form of credit which emphasizes on financing the borrowers with the help of their ‘peers’-individuals and small lenders who would be earning interest on the amount they lend. Borrowers could put in their application via an online platform meant for personal loans that are often unsecured and financed by peer investors.
Tracking the Steady Growth of P2P Lenders
The P2P lending marketplace works effectively via a simple and hassle-free online platform that helps in connecting lenders and borrowers, thereby eliminating the conventional banking protocols. The Peer-to-Peer platforms are not used to lending their funds but they act as intermediaries or facilitators for both the lender and the borrower. We know that the Peer-to-Peer lending space is currently growing at 48 percent CAGR and is forecasted to reach over $800 billion by 2024 globally.
The Peer-to-Peer lending system has made the typical practice of loaning and borrowing money simple and easy. You could find loans online easily with just a single click of your mouse and without the ordeal of visiting a brick-and-mortar financial institution or bank and waiting endlessly for loan approvals. Simplified applications, low-interest rates, and even accelerated decisions have gone a long way in making P2P lending model a grand success in this digital era. P2P has not only offered borrowers a much improved financial platform, but it has also, provided a great opportunity for lenders. P2P lending is a good and alternative way of investing your money. We understand that a lender enjoys amazing paychecks and decent returns. Here are some P2P benefits.
Advantage: Lenders Earn 16 to 22 Percent Returns
People invest since they wish to earn returns and P2P companies would be giving you excellent returns. Those lenders who play it safe would be making more than 16% while those lenders who are ready to take the risks and accept the challenges would be earning as much as 22 percent.
Advantage: P2P Is Supposed to Be a Great Asset that Promises More Stability than Stock Market
We know that the stock market would be giving you returns at 20 percent or even more over time. What is so great about investing in a Peer-to-Peer lending company? Stability is the key to the success of a P2P company. We know that way back in 2008 and 2009, the global stock market had collapsed incurring a loss of over 55 percent of its worth but across the globe, Peer-to-Peer loans did not cease and borrowers went on paying the lenders money. Whenever the borrower refuses to pay, some legal action could be taken according to the agreement or contract. P2P lending is regarded as an asset class, as far as, consumer credit is concerned. You could diversify your investments across numerous borrowers.
Advantage: The Return Is Incredibly Exciting
It is a good idea to invest your money rather than keep it idle. We know that idle money would not at all generate any revenue. You have several asset classes to pick from. However, P2P lending is known to deliver much higher returns in comparison to MFs and stocks and must be regarded as an integral part of an individual’s investment portfolio.
Borrowers would be repaying every month and that implies there would be a steady flow of cash every month back to you. If you reinvest this monthly inflow it would give you a chance to receive even greater returns. You may browse https://www.libertylending.com/ for professional assistance and perfect lending solutions.
Advantage: Enjoy a Stress-Free Life
The money you lend to people would assist in bringing positive lifestyle modifications in them. Thanks to your investment, people are successfully coming out of the debt trap. Moreover, a P2P lender could enjoy a feeling of fulfillment as he could help other people in financial distress and gain rich dividends too.
While several investors are continuing to get amazing returns on the Peer-to-Peer platforms, some sections of society are still skeptical about putting in their money on this platform. People who have the guts to take the risk are embracing this platform but the fact remains that a massive leap of trust and faith is essential to lend your own money. You have to appreciate that all reputed P2P lending organizations constantly intervene and try minimizing risk to lenders. However, the risk on this platform is perpetually supported by impressive yields and it is not possible to enjoy those returns without a certain amount of risk. Let us discuss the major risk involved in becoming a P2P lender or investor and ways to mitigate them.
Risk of Loan Defaults
There could be risks of default from time to time. Investors may end up losing all or a portion of the principal because of loan defaults. You could mitigate such a risk by taking a few crucial steps. If the P2P platform constantly keeps track and intervene diligently this risk could be minimized. Conventional data such as salary slips, bank statements, etc. supported by online transaction data, digital data, social and mobile data must be meticulously assessed and evaluated for understanding the intention, ability, and stability of the borrower in terms of returning the borrowed money.
P2P lending is certainly a disruptive and revolutionary financial innovation of the digitalized world. Advanced technology is the lifeline of Peer-to-Peer lending. It provides funding to those who are deprived and is an opportunity for financial inclusion. With well-rated borrowers who are paying back on time, with the simplicity and ease of asset class, with the assurance of impressive returns, with a conducive and stringent regulatory framework and more transparency of data in the system, Peer-to-Peer lending could certainly be regarded as a profitable investment class. In recent times, P2P lending is regarded as the most revolutionary among all the Fintech disruptions. Peer-to-Peer lending platforms would be connecting people who are willing to lend with people who want to borrow. Thanks to the tech-enabled processes, the intermediary costs have been eliminated thus, helping lenders to enjoy higher returns and borrowers to get lower rates of interest. P2P lending is the way to go.