How P2P Platforms Can Generate Revenue Through Higher Yield

P2P loans have become an alternative to traditional bank loans.

By Rajat Gandhi, Founder and CEO, Faircent.com

P2P or Peer to Peer Loan is a debt financing mechanism that connects individuals and businesses in need of credit with people willing to lend in a digital market. P2P loans have become an alternative to traditional bank loans, allowing investors to get a return on their investment and borrowers to quickly obtain low-cost credit due to the absence of intermediary costs.

How does the P2P loan work?

There are many digital platforms and marketplaces that allow P2P lending. It is a simple process in which a lender opens an account on the platform and transfers the money they want to invest in the form of loans to their escrow account. Likewise, the borrower registers on the platform with financial and personal information to benefit from the loan.

How do P2P lending platforms enable superior returns?

Right now there are plenty of investment opportunities, but how do P2P lending platforms enable superior returns? After the lender gives the money to the borrower, starting the next month, they start receiving the money every month as an EMI from the borrower. It includes principal and interest. However, to achieve higher and more stable returns, lenders need to build a diversified portfolio. Thus, they must choose a platform that offers several loans and loan products or helps them diversify through portfolio management carried out using scientific data analyzes.

Investment decisions and choices that can lead to higher returns –

Reinvestment

Reinvestment is one of the options to maximize your investment. Money earned from investment interest each month can be reinvested. The lender can either withdraw it or reinvest in other loans. In addition, the reinvestment takes place without the need to spend additional time allocating these funds to different investments. When a person adopts to activate reinvestment, their monthly income is reinvested in similar products or plans, which continue to generate returns.

Account Aggregator Framework Accelerates Cash Flow Based Lending

Automated investment

The automated investment options offered by P2P lending platforms allow individuals to manage their portfolios without spending time and effort. Lenders don’t have to study and select every borrower profile. Instead, they can automatically divert funds to invest in which the platform’s algorithm automatically finds borrower profiles that match their investment goals. It is one of the most efficient and time consuming investment processes.

Systematic portfolio management

Systematic portfolio management products are another effective way to generate additional returns. Here, investors pool their money in one wallet. In addition, the platform deploys data science and analytics to build and manage portfolios with the potential to generate high and stable returns. All the investors have to do is add the money to their account and allow the platform to allocate the funds. The algorithm will allocate funds to different loans and products with higher capacity to provide higher overall returns.

Conclusion

P2P platforms like Faircent today offer a plethora of options for the savvy investor – various plans with different durations and payment options. These allow lenders to find a match in terms of yield and liquidity with respect to their investment objectives. There are different plans – from those that offer high returns like up to 12% with a 12 month lock-in to much more flexible plans like those where funds can be withdrawn within 24 hours.

Simple, contactless online processes ensure seamless income generation for the lender and access to low cost instant credit for the borrower. P2P loan emerges as an ideal investment opportunity, in which people can invest without worrying about market risk in other investment options.

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