- Peer-to-peer lending is a form of direct borrowing of money from one individual to another without any official financial center participating as an intermediate in the deal.
- P2P lending is generally done through online platforms that match lenders with potential borrowers.
In this guide, we will take a look at the pros and cons of peer-to-peer lending.
- In a traditional lending process like bank loans, a person should need to spend a lot of time in processing the loan., Whereas, in the P2P lending platform, you can lend or borrow your money between two peers in no time.
- P2P lending is composed of smart contract agreements to avoid conflicts, and it is an automated lending process.
- In this, the investor gets higher returns when compared to other investments.
- As there is no intermediate in the process, the investor is free from the transaction fee.
- As the process remains more quick and uncomplicated, it is considered more flexible than traditional money lending.
CONS:
- Basically, the most important risk is when you decide to deploy your capital in a P2P platform, be clear in choosing your platforms because if something goes wrong, then your money is at risk.
- Any interest if you earn from this process, you will be taxed, and also you need to declare on your annual tax return.
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