The millennial (individual who reached adulthood in early 21st century) have changed their investment portfolios; have moved on from the common options like real estate, equities or precious metals, and now have moved towards new investment option i.e. peer-to-peer (p2p) lending platforms.

Peer-to-peer or p2p lending refers to the type of lending which connects individuals through online services that matches lenders with the borrowers. Since it all works online, the p2p lending companies run with less overhead and provide services to the lenders and borrowers more cheaply in comparison to the traditional financial institutions. Thus the lenders earn higher returns compared to saving and investment products offered by banks. The borrowers can also buy money at lower interest rates.

Faircent, Lendbox and i2iFunding are now the ‘trending’ investment options for the youth adults in the country. These young professionals who are not happy with their returns from traditional methods have now shifted to p2p lending models.

The simple process has played a crucial role in attracting the lenders. The process is done entirely online and the investors can start with amounts from Rs 5,000. The lenders can select from high, medium or low risk borrowers and in accordance to that can make 14-30% annual on their investments.

Firms have taken care about the genuine borrowers to avoid defaulting of the money. They require six months’ bank statement, CIBIL score, salary and tax statements of the borrowers and basis of this they sort the borrowers into different categories. Lenders add their own refine by checking different other factors like person’s credit history, job stability and whether they provided a permanent address when deciding who to lend to.

It’s not just the simple process, it is the protection policy of these peer lending firms that have drawn the attention of young 25 year old professionals. The protection policy makes it easier for the first timers to start lending. The majority of the lenders on such websites are salaried professionals who are looking for more earning options, but there are also the 25 year old businessmen who are fairly active on the websites.

Few lenders are also from the traditional money lending families who use this platform to continue their family business while being active for their career options as well. Once these lenders get comfortable with the concept, they tend to use their capital at different platforms and even change and diversify their risk to an extent.

According to Rajat Gandhi, chief executive of Faircent, about 60% of the 10,000 lenders on the platform are under the age of 35, with a significant chunk being under 30. “Most 30-year-olds haven’t experienced a good asset class. This offers quick returns month-on-month,” he said.

Raghavendra Singh, cofounder of i2iFunding, said the shift is recent. “When we started out in 2015, 80% of the lending was done by 10-15 large investors. Now we have 1,500 investors, 30% of whom are under 30. Many of them start with investments of Rs 5,000 and increase it over time.”

“Thirty-five per cent of our lenders are under 30; if we extend this to people under 40, then the number would be as high as 70%. The borrowers, too, tend to be much younger -about 60% would be of a similar profile,” Bhuvan Rustagi, cofounder of Lendbox said.

Tags: Faircenti2iFundinginvestment optionsLendboxP2P lendingpeer-to-peer lending