Pros and Cons of P2P Lending Platforms

Pros and Cons of P2P Lending Platforms

The global pandemic showed how strongly different circumstances are out of our control. Investing is a perfect habit as it gives you at least partial control over your financial stability. Every year, hundreds of thousands of people invest on P2P platforms; and while it is a simple and quick way to get good returns on investments, it is essential to understand the risks and benefits of a particular investment tool.

PROS

Higher interest rates

A more direct and straightforward investing approach allows for a higher return on investment. Hence, it is usually considered the most significant advantage for many P2P investors. For instance, with "Hive5", you could earn up to 19% annual return. The P2P platforms have fewer overheads than institutions providing traditional investing methods; for that reason, investing on a P2P platform offers to earn significantly more interest than choosing a traditional saving account.

Easy to Diversify

Most P2P platforms offer various options to invest funds in whatever way investors want. You may diversify your investment across different types and amounts of loans, countries, loan originators, etc. Apart from consumer loans, soon, on "Hive5", you will be able to invest in equipment leasing, business loans, real estate projects, and green loans. To be clear, it is essential to spread the risk and not put all your money into one loan.

Easy to Use

Luckily, investing is becoming more and more user-friendly experience. In fact, many investors find that P2P platforms are relatively easy to use compared with other investment types, such as stocks and shares. Moreover, as an investor on a P2P platform, you stay well-informed about the borrower, loan originators, and your investments' statistics. Indeed, we assure you that if you choose to invest with "Hive5", you will be serviced by our friendly team who is always ready to assist you in this exciting investment journey.

More transparency

We strongly believe the best piece of advice which we could give you before investing is - you should always do your own due diligence. Most of the P2P platforms communicate their transparency as the biggest advantage. Hence, by investing in a particular loan, you can know the purpose, how the funds will be used, and usually their risk score. Besides, the reliable P2P platform always provides the needed information about the company's management. Generally speaking, it's always a good idea to check out who is running the platform, their professional backgrounds, and how their words meet reality. (Here, you can learn more about the Co-founders of "Hive5").

Nevertheless, investing on P2P platforms comes with a few disadvantages.

CONS

Taxes

While enjoying a return on investments, remember that you will have to pay tax for interests you have earned. Thus, whatever money you earn from your P2P investment, you have to declare on your annual tax return and pay interest by your country's tax obligations.

No government protection

Unfortunately, the government does not provide insurance or any form of protection to the investors in case the money you invested is not paid back. Nevertheless, our processes are created to protect users against the risk of defaulting borrowers. The "Hive5" platform gives an extra security on every investment – it is a "Buyback guarantee ". Therefore, the money will be repaid to investors even if the borrowers default for more than 60 days.

It could take time to withdraw invested funds

It might not be available to take out your invested money immediately during a loan agreement (or on some platforms, you might be charged interest for it). The process may not always be as quick as you might like. On the other hand, if you plan a big purchase shortly, always choose short-term loans, as it could be easier to manage your portfolio.

Weight of Pros vs Cons

As with all financial decisions, the right one should be personally made by you. No doubt, a P2P platform is an effective way to diversify your portfolio or start investing if you are a beginner. However, there's always some risk associated with every investment, and P2P lending is no exception. We always recommend you diversify all your investments.

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