Why we love Peer-to-Peer lending

It is easy to see the appeal of P2P lending since returns average between 9% and 14% in a time when stock markets are volatile and most categories of bonds are offering rock-bottom rates. When compared to the safer class of assets, such as fixed or bank deposits, the contrast is striking with banks and financial institutions offering extremely low or even zero/negative real rate of returns.


In this climate of low interest rates, casual investors face a problem when it comes to seeking income; do they invest in stocks, which fluctuates by the day, is time consuming and requires a certain amount of expertise? Or should they invest in investment funds, which despite their fees, are still considerably risky? What about fixed deposits, whose relative safety comes at the cost of low interest rates, usually insufficient to even keep up with inflation rates?

What does all this have in relation to peer-to-peer (P2P) lending? Well, it may be the answer, or at least a very interesting option, for these investors. If you are seeking the reasons as to why you should start looking at P2P lending as an alternative income source, read on.

1. The returns!

It is easy to see the appeal of P2P lending since returns average between 9% and 14% in a time when stock markets are volatile and most categories of bonds are offering rock-bottom rates. When compared to the safer class of assets, such as fixed or bank deposits, the contrast is striking with banks and financial institutions offering extremely low or even zero/negative real rate of returns.

It may seem overly-simplistic to compare P2P lending with fixed/bank deposits this way; but to grow your wealth or at the very least, preserve it, the interest rates you can get with such forms of investments are on average, too low to even keep up with rising prices. There is also usually a caveat with saving accounts/deposits that offer slightly higher rates, be it requiring for you to tie your money down for many years, or spend a certain amount each month.

2. Expertise/time required

Compared to investments such as stocks or bonds, P2P lending is a much easier thing to understand. Here’s how peer-to-peer lending functions at Funding Societies (from our very own FAQ):

“We help borrowers secure loans for growth, investors to get good returns for their loan investments and banks to reach the under-served SME segments. The investors crowdfund into the loans and earn returns through the interest paid by the SME borrowers.”

It is as simple as that. It is considerably simpler to grasp than say, investing in stocks, which not only requires a considerable amount of proficiency but a significant amount of time as well. With P2P lending and at Funding Societies, due diligence and credit assessments on the prospective borrowing companies have already been performed, which is another piece of timesaver for investors.

3. Low barriers to investment

With a S$1000 minimum first deposit and S$100 investment per loan at Funding Societies, the barriers to start investing in P2P lending cannot be much lower. With your first deposit, you can potentially diversify into as many as 10 companies and achieve a good level of diversification with this considerably low investment amount. There is also much more flexibility available as investors will be able to choose from loans with tenors ranging from 3 to 24 months, as compared to assets which will require you to lock-in your funds for a period of time in addition to the high capital requirements.

Based on the above, it is safe to say that P2P lending puts forth an extremely strong case for investors, casual or otherwise, to consider allocating part of their portfolio to such investments. To find out more about investing in P2P lending with Funding Societies, visit our investing page. With our use of an independent escrow account and our astute credit assessment process (as affirmed by our 0% default rate), it is certainly worth signing up with us and starting your investing journey into P2P lending with us!



November 02, 2016    Funding Gap: SMEs in Malaysia
July 01, 2016    Insuring Your Future




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