Tuesday, 8 December 2015

Strategy to enhance your return on P2P Lending platform

While Peer to Peer Lending (P2P lending) in itself provides an opportunity where in the rate of returns are significantly higher than the traditional financial instruments; lenders also have a chance to enhance their returns by following certain simple tools and methodology.

 1.    Diversify

The easiest tool is to diversify among lenders and increase your return. The more you diversify the chances of default goes down significantly. Take for example if you put Rs. 100,000 across 4 loans and if one of them defaults, your 25% of capital is eroded; however if this amount is spread across 10 borrowers and if one defaults only 10% is eroded which can easily be compensated (rather more than compensated) with the returns your earn from the balance 9 loans.

 2.    Reinvest your returns

One of the biggest advantage of P2P lending is that there is a fixed (monthly) return, in the form of interest, which you receive in your account. One should look at reinvesting this cash flow among other borrowers to ensure that there is compounding effect that occurs with respect to your investment. The biggest mistake lenders often do is to withdraw this amount.

3.    Increase your risk

While all lenders look at lending to Category A and B borrowers; one should not shy away in investing a certain amount of money in lower category borrowers. These borrowers present an opportunity to give you a higher rate of return. The way is to complete your diligence with respect to borrowers and start investing. Our experience across such profiles show that these are genuine and credible borrowers; however for one reason or the other get a lower rating.
4.    Use the filtering effectively

Rupaiya Exchange provides and effective filtering mechanism where in the loans can be filtered across category of borrowers, tenure, location etc. Use of such filtering in searching for loans can be effective in earning higher returns while minimizing the risks.

Following a correct strategy for investment and being regularly updated is the key to effective management of your investment on a P2P lending platform


 @RupaiyaExchange is a virtual market place for Peer to Peer Lending.

Rohan Hazrati (@HazratiRohan) is the Founder of Rupaiya Exchange. He has worked across geographies and in his last assignment was the CFO and Managing Director of a multibillion dollar enterprise.
You can write to us ([email protected])/ visit the website (rupaiyaexchange.com) or tweet us @RupaiyaExchange

P2P Lending has risks and may affect your capital
Views are personal

#rupaiyaexchange #p2p #p2plending #loans #borrow #alternative financing #retirement #fintech

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