What are the main risks involved in P2P Lending?

Some of the cons about p2p lending:

  1. New type of investment; most investors are skeptical tapping the market, they only try minimum amounts – testing the waters
  2. Most p2p lending platforms offer unsecured loans, risk of default
  3. Limited information about the loans offered
  4. Each p2p lending platform has its own rating system on the loans offered, hard to have a benchmark for reference
  5. Risk of platform default

Number 1 rule I follow, and I am quite strict about this one cause thats the only way to safeguard my investmetns, is diversification.

In p2p lending currently I invest around 20% of my total investments, I begun about a year ago with only 5% but the results have been steady, hassle-free and good, so I have raised my exposure to 20%. I have been earning around 9.5% net per year. I do not use only 1 p2p lending platform and my total exposure is currently spread into 5 different platforms; 2 of which offer loans backed with buyback guarantees.

The reason I have allocated only 20% in p2p lending is because its a fairly new type of investment, most p2p platforms offer high rates but on unsecured loans, thus the default risk is always there.

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