Is p2p lending a viable option for serious investment? Let’s examine the pros and cons…
- Earn a moderate to high returns
- Quick diversification across multiple p2p loans
- Able to review and select loans
- Social aspect of p2p lending may discourage borrowers from defaulting
- Risky p2p loans may not be priced properly
- p2p borrowers may over-borrow using multiple platforms. p2p loans don’t have covenants to protect lenders
- p2p platforms may not be able to do proper risk assessment and don’t have skin in the game.
- Limited information disclosure for the borrower and the platform
- Refer here for more bear case.
Ultimately… it’s your choice
p2p lending is still at a very early stage and will continue to evolve. The risks are significant but diligent investors may be able mitigate them through careful analysis, diversification and choosing the right platforms.