By now, you’ve probably heard about P2P lending as a fast-growing alternative investment.
P2P lending allows investors to earn attractive interest on their money by lending it to businesses with growth potential and plans. Returns come in the form of regular repayment of interest and principal. For any given loan, there could be hundreds of investors who put up the money and share the risks and returns of the investment.
There are some misconceptions about P2P lending, which you should be aware of so that you can make your own informed decision whether to invest in it or not.
Read Also: The Myths And Misconceptions About Peer-To-Peer Lending
The P2P Sector Has Grown And Matured
The alternative finance industry, or marketplace lending, has become increasingly popular regionally in recent times and has been growing at an impressive pace.
In 2016, Southeast Asia’s alternative finance market grew 363% from 2015 to a value of US$215.94 million, with marketplace business lending amounting to more than half of the market’s value. Further data showed that the market size of Singapore’s marketplace business lending grew almost 10x from US$9.43million in 2015 to $88.4million in 2016.
Funding Societies, one of the leading P2P platforms in Singapore and Southeast Asia recently surpassed $200 million in P2P loans successfully transacted through their platform, while maintaining industry-low default rates. The number of investors of P2P loans have also increased significantly – with 75,000 investors on Funding Societies’ platform alone.
Earlier this year, the Singapore Fintech Association formed the Marketplace Lending Committee, with the aim to represent all marketplace lenders, nurture and build relationships, design and promote good practices, and play a part in ensuring that the industry remains a reliable and viable source of alternative financing for business owners.
Why Invest In P2P Lending?
There are many good reasons why investors might want to consider investing in P2P, including flexibility, low investment amount, and transparency about the company you’re lending to, and their own skin in the game.
There are a few platforms that offer retail investors with P2P investing opportunities. One of them is Funding Societies, where users can enjoy loans with a short tenor, receive fast and frequent updates to their app and platform, as well as access loans with high potential returns.
Once you’re ready to take the plunge, head over to Funding Societies’ website to sign up for an account and take a look at the loans that are currently available for investing.
Read Also: 3 Good Reasons Why You Should Consider Investing In P2P
Sound Investing Principles Still Apply
Even though P2P lending is a new and nascent investment instrument, the fundamentals of investing still apply, such as diversification, investing only what you can afford to lose, and knowing your own risk tolerance.
All investments carry risk, and you should be fully aware of what the risks are before investing your hard-earned money. The key risk being that of companies defaulting on their debt obligations.
Read Also: 8 Principles Of Investing For Beginners And Beyond
