With the growth of the alternative finance market Peer to Peer lending has led the way with a significant share of this market.

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P2P platforms are becoming a popular option for investors looking to gain more profit from their money. Peer to Peer lending brings borrowers and investors together through an online platform. The lending process is carried out without any intermediary. If you are looking to invest in P2P loans, it is important to know the advantages and disadvantages related to this asset class.

Advantages of P2P Lending:

There are several advantages of investing in P2P lending:

High returns on Investment:

P2P lending has the potential to higher returns to the investors than the other traditional investments. You can even earn a double-digit interest from it.

Portfolio Diversification:

Investors can reduce the risks by spreading their capital over a range of different investments. P2P investments allow you to build a diverse portfolio of assets.

Access To Funds:

A great advantage of Peer to Peer lending is that you can add or withdraw your funds at any time. Some platforms also offer an auto income option to receive your earnings every month in your bank account.

Tax-Free Potential:

If you are in a position to open an IFISA, you can earn a tax-free interest by investing in P2P lending.

Disadvantages Of P2P Lending:

Along with benefits, P2P lending has some risks that are as follows:

Credit Risk:

FSCS does not protect P2P loans, and most of the loans are unsecured, so if any borrower defaults, you can lose all your investment.

Time Constraints:

P2P has a wide range of loans, so it may take a long time to consider and manage the diverse portfolio.

Long Time Fund Lockup:

One more drawback of P2P lending is that if you want to get the best return, you have to invest your money for a long period, usually for a year.

Similar to other financial decisions, the choice of Peer to Peer lending depends on your risk appetite and personal circumstances. However, you should think beyond the interest rate and understand the risks before making a final decision.

How IFISA can Help?

P2P lending can lead to a profitable business for investors. So the online solution providers have started web portals that facilitate Innovative Finance ISA or Innovative Finance Individual Savings Account. That assists the lenders to invest in an online business by providing loan money to the borrowers. The IFISA platform supports these deals between two the two parties. Therefore amount of risk you are undertaking won’t only relate to the investment but it will also rely on the solidarity of the portal service provider. Therefore possessing the sound working knowledge of the platform is necessary to gain maximum profits from it. One of the ways of making sure that you are making the right decision is by observing the bigger investors on the platform. You should see if they have invested in the platform. So you can benefit from their research work on the integrity of the IFISA portal.

One of the facts that you should consider important is that how convenient it is to withdraw your money whenever you require from your account. The IFSA accounts are flexible, so you can take out the money you require and then deposit it back at a later time without consuming your annual allowance for the tax quota from the tax year.

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