P2P lending is a brand new investment sector gaining quick popularity as it is a relatively safe, profitable and reliable way to invest. P2P lending brings creditworthy borrowers and investors together and enables investors to earn a reasonable interest rate. Certain P2P lending platforms, such as MobiKwik, offer diversification techniques whereby investors’ finances are spread across multiple loans minimising the chances of defaulting. In P2P lending, credit seekers are screened on several factors ensuring the safety of the investment making P2P lending an excellent solution for investment and tackling the credit challenges in the country. Due to the unique benefits of P2P lending to both borrowers and lenders, its popularity is likely to grow significantly in the future.
What Is P2P Lending?
P2P or peer-to-peer lending platform is a marketplace that allows individuals to lend or borrow money without the involvement of any bank or financial institution like a bank or an NBFC, thereby reducing the margins in the transaction. Today, with the help of technology, several Fintech companies have introduced P2P lending, such as Xtra, bringing informal lending into the realm of the formal financial system.
Current Trends of P2P Lending
Peer-to-peer lending is quickly becoming a popular alternative to bank lending. According to a recent forecast by IndustryARC, the following market trends support this fact.
- The P2P lending market is anticipated to grow at a 21% CAGR and reach a valuation of $10.5 billion by 2026.
- NBFC’s offering of P2P lending has already surpassed banks in offering debt financing to SMEs. According to the report, around $105 million worth of SME debt financing was sourced from P2P lending platforms.
- Real estate debt financing will rely on P2P lending heavily in the coming years. Real estate application of P2P lending is anticipated to grow at a CAGR of 25.7% and emerge as a significant segment in the P2P lending space.
Future of The P2P Lending Market
P2P lending has the potential to reinvent banking. Looking at the above market trends, the future of P2P lending seems promising, and it can steer forge ahead of bank lending in all sectors.
- The online P2P lending segment holds the biggest market share within the P2P lending market, and this trend is likely to continue. Online P2P lending enables contactless investment instantly and facilitates quick loan approval and disbursement. Online P2P lending platforms incur low overheads, and the benefit of this lower operating cost is transferred to the borrowers and lenders, making the scheme more attractive to the investors.
- P2P lending will expand as an investment opportunity for lenders looking for greater returns as they can choose borrowers who match their reward and risk attributes. It can also outdo any other currently accessible investment options.
- P2P lending has an important place in the fintech industry. Fintech apps like the MobiKwik Xtra App make P2P lending much more convenient for users to navigate. Through P2P lending facilities, individuals who wish to borrow are directly linked to potential lenders. There are no intermediate costs due to technology-enabled features. While borrowers can enjoy lower interest rates, lenders can earn greater returns.
- P2P lending can considerably alter the Indian financial industry through the democratisation of lending with the support of technology.
How is P2P lending different from bank lending?
- With the high inflation rate in the country and the volatile stock market, P2P lending may be a more dependable option for Indian investors.
- P2P lending interest rates can win over fixed deposit rates and are not influenced by market volatility like stocks.
- The returns that lenders make via P2P lending can consistently trump fixed deposits and savings account returns.
- The strict screening of credit seekers and investment diversification make P2P lending a safer alternative to stocks, especially suited for investors with low-risk appetites.
- Factors like credit history, income, financial discipline, and spending habits of potential borrowers are evaluated before they are allowed to sign up on P2P platforms to avail of loans.
- With P2P investments, investors can earn up to 12% interest greater than any traditional fixed-income sources, such as mutual funds.
- In comparison to traditional bank lending, P2P platforms can prove to be a lucrative alternative investment option as investors can gain easy access to creditworthy borrowers. By eliminating the middlemen and the bank, they can obtain loans at low-interest rates.
Peer-to-peer (P2P) lending eliminates the need for a centralised lending institution by connecting borrowers and lenders directly. Websites and apps like MobiKwik Xtra that facilitate peer-to-peer lending have substantially boosted their popularity as an alternate means of funding. You can begin your P2P lending journey and manage your investments from a single app like the MobiKwik Xtra app and earn daily interest.