5paisa Loans Blog

How lending is the best option for fixed monthly income?

By Anurag Srivastva | 22 Mar 2020

While P2P lending is still a rapidly growing segment of the financial markets, one aspect that we tend to ignore is the fixed monthly income aspect. The interest on the investment is paid on a monthly basis and the principal is paid back on the completion of the loan term. You can also structure it as an EMI. That is the flexibility you enjoy with P2P lending.

When you lend you need to be wary of the risk you are taking. Most P2P lending platforms have a series of 7-8 customer classifications and the rates of interest could range from as low as 14% to as high as 35%. There is a risk element but P2P still presents a very sound investing option for you. Here is why.

With the RBI regulating P2P lending in India, the growth is likely to be more regulated. Before a loan is given, the platform makes a thorough study of the borrower’s payment track record, credit score and cases of recent default. Now, P2P lenders have been authorized to report default cases to CIBIL and that acts as an additional level of safety for the P2P lender.

Here is how a P2P lender can structure lending. Look to diversify the corpus across multiple borrowers with different credit profiles. This will reduce your overall risk yet ensure above-market returns. Most retail borrowers have credit scores to protect and that helps the lender. Also, the low acceptance rate in most P2P lending platforms ensures that the lower quality borrowers are weeded out. You can surely look at P2P lending for regular income.