When it comes to investment, there are many asset classes available for which you may think about. Most people invest in stock markets to earn a reasonable return. However, the interest rates on bank savings accounts have been remaining low for years. That is why investors are looking for alternatives to these traditional investments so they can earn high returns on investments. Peer to peer lending is one alternative that is becoming popular among investors as it offers high-interest rates on p2p loans. Investors are attracted to high interest rates, but you should keep in mind that the more the interest rate, the more will be the risk. It is also important to remember that all investments carry some types of risks, and you may lose all your money.
Let’s compare peer to peer lending with other investments to find why it is an excellent alternative investment.
Peer To Peer Lending Vs Bonds
P2p lending and bands are almost the same things because both are debt instruments, and investors will earn a fixed return or a fixed time period. When you invest in bonds, you are lending money to the government or companies. On the other hand, in p2p lending, you lend money to individual borrowers or small and medium businesses. With bonds, you will get the interest after a certain period, but you will get your capital when loan terms end. While in p2p lending, you can get monthly installments of the principal along with the interest rate until the maturity date of the loan. P2p loans are usually short-term and last from a few months to a maximum of three years. Bonds have an extended maturity date that can be up to 10 years.
Peer To Peer Lending Vs Stock Market
Most investors choose to invest in the stock market because it has been in the investment market for hundreds of years and has proven itself. It can be an excellent investment when you want to invest your money for an extended period of time and have a diversified portfolio. However, the changes in the profit that you earn from stock can change unpredictably with the changes in the economy. However, p2p lending is less volatile, and you can make a fixed return. If we compare p2p lending with sticks, we can see that the return rate of p2 lending is 26% higher than stocks. P2p lending can be a better way if you want to earn money within a short period of time.
Peer To Peer Lending Vs Savings Accounts
The bank saving accounts offer relatively lower returns. If you put your money in a savings account for a longer period, you may end up losing your money to inflation. It is because the cost of living and goods are increasing day by day. It means that you will lose the power of spending. Investing in saving accounts makes sense only when you need your funds for the short term. However, if you do not need it, you should invest in better investment options like p2p lending so that you can enjoy the benefits of compounding interest.
Peer To Peer Lending Vs Crowdfunding
Most often, p2p lending and crowdfunding are considered the same things because both methods include lending money to the borrowers. The significant difference between them is that crowdfunding is equity-based while p2p lending is loan-based. In crowdfunding, you fund projects of your choice and, in return, get discounts on products or equity in the company. While in peer to peer lending, you invest in p2p loans and start earning monthly income as the interest rate.
Peer To Peer Lending Vs Real Estate
You can invest in real estate in different ways, and there are various deals available in the market. When we compare it with peer to peer lending, it is clear that p2p offers higher returns. When you invest in real estate crowdfunding, you can get 3-7% returns, while with p2p lending, you can earn 10 to 15 % returns. However, in terms of risk, real estate investment is less risky than p2p lending.
You can see that every investment has its own benefits and drawbacks. You can choose anyone depending on your risk appetite and individual circumstances. Peer to peer lending offers high returns in a short amount of time. However, we suggest you diversify your investment portfolio so that you can reduce risks and increase your returns.
