Top Reasons to Invest in the P2P Lending
Top Reasons to Invest in the P2P Lending – Seeing your investment grow with time is a rewarding experience. However, not all investment options are worth considering. Most investors in India build their investment portfolios based on the risk-reward ratio. While some investors prefer investing in low-risk instruments like FD, corporate bonds, and government bonds, some dare to put their funds in real estate and equities, aiming to reap higher returns despite higher risk.
When it comes to stability and ensured return, FDs are still the game changers, but the interest income they offer is not that substantial considering the tax cuts and inflation. That’s where a P2P lending option comes into play. Lately, it has emerged as a viable investment option for enthusiastic inventors. Let’s find out what makes this platform a popular choice for investment among risk-averse investors.
Underscoring the potential reasons to invest in P2P lending
Peer-to-peer lending has revolutionized the financial sector by offering a technologically powered platform wherein investors and borrowers can interact without any need for intermediaries. By harnessing machine learning, AI, smart contracts, and blockchain, P2P lending steers clear potential barriers to lending and borrowing. It mitigates unnecessary costs and enables expedited services. From an investor’s standpoint, this is a clear sign of growth and long-term sustainability. Here are some top reasons to invest in the P2P lending.
Bright Future ahead
The Indian P2P lending Market is expected to surpass the astonishing mark of $10.5 billion by 2026 while maintaining a healthy CAGR of 21.6%. This spike in growth is fuelled by the GOI’s vision to augment the scope of cashless technologies nationwide, ensuring financial inclusivity and growth of investors.
Handsome return in no times
Unlike other investment instruments, rewards come early with the P2P platform. Also, some P2P platforms offer instant withdrawal under the liquid plan that builds interest on a daily basis. Statistically, P2P can offer healthy returns ranging from 8-12% in the face of market volatility.
No onboarding and investment hassle
P2P lending ensures easy entrance for new investors with no restriction on the investment threshold. You can even create an investment portfolio with a moderate amount of Rs 10000 and increase it gradually once rewards start rolling in.
Reinforce a consistent stream of income
Most P2P platforms reinforce a steady influx of income for investors under fixed-term, monthly-based, and liquid plans. Whereas fixed-term and monthly-based options offer the flexibility of reaping the payment on predetermined intervals, liquid plans ensure instant withdrawal with no ask. All these options are strategically devised to cater to the varied needs of investors.
Leveraging advanced technologies
From suggesting potential borrowers and drafting legal contracts to recovering payments, P2P takes care of everything with utter precision and agility- thanks to its incredibly robust technological resources. The P2P platform provides investors with real-time updates so that they can make the right decision at the right time, and consequently keep the discrepancies at bay.
Utmost control over potential risks – Top Reasons to Invest in the P2P Lending
By leveraging AI, smart contracts, and blockchain, P2P platforms obliterate almost all risks associated with lending and borrowing. These technologies work in sync to ensure pinpoint inspection of borrowers’ profiles and credit history so that lenders can proceed with loan disbursement without worrying about repayment defaults.
Considering the risk associated with lending, the investor can also diversify their investment by lending money to multiple borrowers. The platform shall keep a tab of each such transaction until the final repayment is made, ensuring peace of mind for the investors.
Tax consideration for P2P investment
Just like fixed deposits, income generated via P2P lending is taxable. Such income is deemed as ‘Income from Other Sources’ and hence is added to the investor’s overall income. The tax rate is estimated based on the individual’s income bracket. For example, if the taxpayer belongs to a 15% tax slab, the interest reaped via P2P lending shall attract a tax rate of 15%.
To illustrate, let’s say you opt to invest Rs 200000 in P2P lending with a 10% interest rate. As a part of repayment, you received the investment amount along with an interest income i.e. Rs 20000 (10% of Rs 200000). Now let’s say you fall under the 15% tax slab. The taxable deduction in this case would be 15% of the interest income i.e.,15% of Rs 20000 = Rs 3000.
Conclusion
The ever-expanding startup regime and soaring demand for credit among the middle class will continue to strengthen the presence of P2P lending platforms in India. Investors looking to expand their prevailing portfolio can make the most out of this unprecedented opportunity and reap handsome returns for years to come.
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