Peer-to-peer lending or P2P lending is turning out to be one of the best ways of making profits; this type of lending offer much better returns to savers who have been looking for ways to earn a better return on savings compared to bonds and stocks that usually come up with huge volatility.
The intervention of regulators has made the P2P industry more attractive and safe for both the lenders and borrowers. This industry is regulated in the majority of big economies such as the United States, the U.K., Europe, and China and so on. Below are the few advantages of regulating this industry:
- Additional shield for consumers
- The effective competition combined with the growth of the industry in a controlled way
- The P2P platforms are bound to provide clear information and how to handle money
- This forces platforms to maintain a stable financial position in the event of a platform failure
Although regulations vary from country to country, the P2P platforms are bound to follow specific standards to create an arrangement between lenders and borrowers.
The majority of platforms permit lenders to get an interest in the range of 5 to 7% depending on the amount invested, borrower’s credit score and the terms of the agreement.
P2P lending platforms have also been developing several investment options for lenders. For instance, you can lend money to borrowers with both strong and low credit rating. You can also select the type of loan, which you believe offers best returns with low risk. It can be personal loans, medical debt, or refinance a home mortgage as a few examples. Similar to banks, each type of loan carries a different interest rate.
The average 5 to 7% return on investments appears attractive considering yield on Treasuries. For instance, the yield on U.S. 10 year Treasuries stands around 2.53% and this yield makes upside and downside move according to the financial and business environment. On the other hand, stock markets offer better returns than bonds, but these returns also come up with the risks. Therefore, the P2P industry continues to evolve as a new profit-making venue for investors.