Make money by lending - My P2P Lending Update

Have you ever lent money on an interest? I have, but only to those who are very close to me and I knew for sure they will give it back. There are a couple of problems with making money by lending:

Trust factor – What if the person you lend to runs away or does not pay back
Guilt – This is an issue. Eg: If you are giving your money to a friend or family member, it is not always nice to ask for an interest. End of the day, it would lead to friction in your relationship
Lengthy legal proceedings in India: My dad still has a case of someone not paying him back that has been going on for 6 years. No sign of him getting his money back

Peer 2 Peer (P2P) lending

This is a modern system, where you lend your money in a regulated platform. The money is lent to those who are in commercial need and would prefer to take a loan from a non-banking entity. I am currently lending Rs.2731 to someone in Kazakhstan who has bought a taxi and is paying me back ? .

There are plenty of platforms out there where you can park your money. The interest you earn is anywhere between 4% to 25%. My interest on the loan to the Kazakhstani cab driver is 20%.

Are there risks involved?

Of course, there are risks. Even if you put your money under your pillow, there is a risk of a fire, robbery or even Modiji demonizing it ?

There is an element of risk in giving money on a P2P platform. A big extent of the risk is mitigated by well established platforms such as Mintos who give a buy back guarantee. In this, if the person who takes the loan from you does not pay back within a certain period, Mintos will buy back the loan from you with interest. They will later follow up on the loan and take legal action to claim the loan. But, that is on them, for you, you get back your money with interest.

This is not for all loans and is not given by all platforms, so pick your investments wisely. Also, don’t go overboard and put every last paisa you have in these platforms. Have a small portion to balance your portfolio.