fbpx

Uncovering A Safe & Secure Peer to Peer Lending Platform

Nov 26, 2021

Photo c/o Lockedinbets

In the data-driven age, borrowing and investing can now be done quickly – online. Though supported more by those who are not risk-averse, peer to peer lending (P2P) has become widely accepted. Borrowers can set up an account very easily and apply for a low-interest loan on the P2P lending platform, then if requirements submitted are complete, get to access their needed funds quickly. Lenders get a nice return from their investment once borrowers’ repayments begin rolling. There are, however, some people who cast a doubtful look at peer to peer lenders and the online investing mechanism.

Just how safe and secure is peer-to-peer lending? Across the world, P2P lending and microfinance platforms have been used by working professionals, business owners, blue-collar workers, students, individual investors, and more. In the US… The question, “is peer to peer lending safe?” can be readily answered in the affirmative. One just needs to opt for lending pros or established peer to peer funding platforms that are transparent about processes and have track record of experience.  

P2P Lending & Fintech innovations in RP

In the Philippines, pioneering peer to peer lending platforms, such as BlendPH, serve as avenue where investors get to grow their investible funds, while at the same time help uplift the lives of salaried individuals or small entrepreneurs. A P2P lending or funding platform like BlendPh has quickly attracted institutional partners, helping actualize its mission of driving financial inclusivity. in P2P lending/investing, one need not have a hundred thousand or vast wealth to get started as an investor; with only five thousand pesos or a portion of one’s monthly salary, one can be a lender.

Pioneering P2P lending platform BlendPH is managed by Inclusive Financial Technologies, Inc., a SEC-certified crowdlending intermediary. The company adheres to the standards set by the Anti-Money Laundering Council of the Philippines. The peer-to-peer lending platform and its fintech partners place technological improvements at the core of their business, ensuring that it is a secure space to transact.

In terms of being a viable investment, lenders simply need to set their expectations – assess their risk profile beforehand, and adopt ways to mitigate risk. As with any other investment, moreso with a financial product, there are risks. With P2P, who is bearing the risk of the borrower defaulting on the loan? The lender. So as not to be hit hard when P2P lending/investing, what some seasoned investors do is allot only a limited part of it in their portfolio.

Along with the risk comes the potential expected returns. Newbie investors/lenders must understand from the get-go what peer to peer loans entail, and grasp the fact that peer-to-peer lending as an investment is really a crowdfunded loan – they are investing in a part of such a loan to earn interest on money.

In a nutshell, the main risks that individuals who have invested on P2P loans can attest to are borrower risk;  loan originator risk; and platform risk. Note that some platforms offer loans secured with underlying collateral, like in the case of a car collateral loan. Personal loans and salary loans are examples of non-collateral loans. The third type of risk can be avoided if you go with a reliable platform. The importance of choosing a major peer to peer investing/funding platform exhibiting transparency in its dealings – from collections rates and default rates to measures being undertaken to address client concerns – is crucial.

In terms of the process itself of getting truly creditworthy borrowers, fully automated logarithms – from application, to verification and onwards – and initial screenings ferret out qualified loan availers. The peer-to-peer lending process also benefits from the feedback effect of investors’ own screening.

Balancing Risks and Rewards

Notwithstanding the P2P lending risks, the question, “Is P2P lending a good investment?” may be answered with a resounding yes by those who have stayed invested, and have been able to balance the risks and rewards.

Investors not only get the opportunity to diversify their investments portfolio in an inexpensive manner, but also have the potential for positive returns on the amount they have shelled out — without the involvement of a bank. Besides diversifying, those returns can be maximized by reinvesting P2P loan payments or earnings made.  Being diligent about reinvesting the loan payments that you receive will prevent returns from declining as the P2P loans pay down. The idea is always to stay fully invested.

Moreover, though peer to peer lending is a type of investment that may require minimal monitoring after a length of time (being a passive form of income), lenders can keep tabs of any earnings in their online account. Borrowers, for their part, are encouraged to be responsible and aware of their financial obligations. In the US, certain sites specify that loan funds cannot be used for gambling or illegal purposes.

Ideally, a peer to peer lending platform can efficiently facilitate quick access to funds for borrowers, and healthy returns for investors, thereby making much sense for both parties. It can be a safe and viable financing alternative for small businesses; and a secure investment for lenders – the outcome can be a better return on money compared to other savings-and-investment opportunities. Hence, peer to peer loans are worth the time fully grasping and experiencing first-hand. Just be sure to go with a socially responsible platform that promotes ethical lending and responsible borrowing.