- What is peer-to-peer investing?
- Is peer-to-peer investing safe?
- How high returns can a P2P investment give?
- How is P2P investing better than other investments?
- What are the tax implications of P2P investing?
- How do I start P2P investing?
What is peer-to-peer investing?
How would you explain a "peer-to-peer" investment to a five-year-old? To put it in the simplest terms - A peer-to-peer investment is when you lend money to someone else, like a friend or a neighbour, and they pay you back over time with interest.
It's a way for people to borrow money without going to a bank. When you make a peer-to-peer investment, you are helping someone else get the money they need, and you can earn more money for yourself by getting interest on the loan. It's usually done using an online platform that matches lenders with borrowers in order to provide loans.
Is peer-to-peer investing safe?
P2P lending is regulated by the Master Directions for NBFC Peer-to-Peer Lending Platform issued by the RBI in 2017. Only an NBFC can register as a P2P lender with the permission of RBI. Every P2P lender should obtain a certificate of registration from the RBI.
How high returns can P2P investing give?
P2P lending could be a potential investment option that can generate passive income.
- Potentially high returns - Historical data suggests that P2P lending may give returns of up to 11%. This is comparatively better than a bank savings a/c or FD.
- Recurring monthly interest - P2P lending may generate passive income in the form of recurring monthly interest payments that could boost your monthly income.
- Low minimum starting amount - The minimum lending amount and the additional investment amount are fairly low. You can start with as little as ₹500.
The online P2P lending market is growing.
The global peer-to-peer (P2P) lending market size was valued at US$ 83.79 billion in 2021 and it is expected to hit over US$ 705.81 billion by 2030.
The online P2P lending segment currently holds the biggest market share at 97%, and this trend is to continue.
This is because, besides enabling contactless instant investment and quick loan approval and disbursement, online P2P lending platforms incur lower overheads. The benefit of this lower operating cost can be transferred directly to the lenders and borrowers on the platform, making them even more attractive to investors.
How is P2P investing better than other investments?
Returns from P2P lending are dependent on the portfolio built by a lender and not on the stock market.
Unlike other market-linked investments such as mutual funds and systematic investment plans where the returns depend on the performance of the stock market, P2P lending returns are determined at the time of lending to a borrower and therefore P2P investments DO NOT depend on the stock market.
Peer-to-peer (P2P) lending can offer other advantages over other types of investments.
- Higher potential returns: This is because the interest rates on P2P loans are often higher than the rates offered by banks and because P2P investors can typically choose the interest rate they are willing to accept.
- Flexibility: Investors can tailor their investments to their own risk tolerance and financial goals.
- Convenience: With P2P lending platforms, investors can typically open an account and start lending money with just a few clicks, and they can manage their investments online or through a mobile app.
- Diversification: P2P lending can be a useful way to diversify a portfolio. By lending money to a variety of borrowers, investors can reduce the overall risk of their investments and potentially increase their returns.
- Social impact: By lending money to borrowers who may not have access to traditional forms of credit, P2P investors can help individuals and businesses grow and thrive.
What are the tax implications of P2P investing?
The interest amount earned from P2P lending is classified as “Income from Other Sources”. It is added to the lender's income and taxed as per the tax bracket lender falls in. So if someone is in the 30% tax bracket, he will pay 30% tax on the interest earned.
How do I start P2P investing?
Stack Flash is a P2P lending service that directly connects borrowers with good credit history with people who are willing to generate returns in form of interest when this money is paid back after being lent.
This is Stack Flash summed up -
- Get up to 11% returns p.a.
- Start with just ₹500
- No lock-in option (For Flash Flexi scheme)
- Earn daily & monthly interest (Flexi & Fixed schemes respectively)
The Flash Fixed scheme gives you up to 11% returns with a 1 year lock-in period and interest that can be credited to your account or reinvested every month.
The Flash Flexi scheme gives you 9.5% returns with no lock-in period and the interest can be credited to your account daily. You can withdraw your investment anytime with the Flexi scheme.
At Stack, we grow your wealth like it's ours. Invest like the top 1% with 👉 Stack Flash.