Lenders win by getting returns above market rates and spreading their risk through a variety of transactions.
Spreading Risk – With P2P lending, lenders are not big institutions but the majority of loans are filled in much smaller Rs.10,000 to Rs.50,000 increments by individuals like you and I. Investors are attracted to an alternative to the paltry interest rates provided through a traditional bank or looking or for an alternative to the stock market.
High Returns – Current returns average over 21% (> 10% flat) depending on the loan type(s) you chose and the term. In today’s market, a 21% return is certainly very attractive; especially if it is diversified into large pools of verified and pre-qualified borrowers.
Lenders Choose – P2P platforms categorize the borrowers for the lenders in their network and ensure that they pass identity verification. Lenders are provided interest rates and terms associated with the risk related to term of the loan, credit score, and other related factors in their funding algorithm. Lenders choose only to invest in the loans that they are interested in. If you don’t like someone that is consolidating credit card debt, don’t invest. Choose only to invest in the borrowers that match your preferences.