Peer-to-peer lending is growing and might be considered profitable in comparison to other financial products such as deposits, bonds, and equity investments, but most definitely it is not risk-free.
Depending on the riskiness of the given loans, the market average return is roughly 10% to 11%. According to market research, the expected return on investment in the Peer-to-Peer lending industry ranges from 5% to 20%. It's important to keep in mind that great returns are usually linked with considerable risk.
Of course, promises of profits that are not based on past data might be misleading. Instead of providing trustworthy insight into future profits, platform operators frequently utilize promised interest rates as a marketing tool.
Profits from Peer-to-peer lending might also be reduced due to various commissions. A platform will usually post information regarding the commissions you might expect. Secondary market fees, profit fees, transaction and withdrawal commissions are all examples of these expenses.
Due to schedule deviations, loan defaults, currency risks, and other factors, actual returns on investment may differ from those advertised. When it comes to yearly returns, loan supply is a huge factor. If a platform's loan supply is insufficient, your money will not be in circulation, and hence will not generate any earnings. Make sure the platform you've chosen offers a sufficient number of loans to invest in.
Losses can reduce profit margins due to a variety of reasons. The failure of a peer-to-peer lending platform or a peer-to-peer lender/investment project is usually the cause of these. If the correct tools and trustworthy Peer-to-peer lending platforms are used, Peer-to-peer lending may still be a solid and successful long-term investment.