Reasons Why Young People Are Investing in Peer to Peer Lending

Peer Lending

The young generation thinks about their financial future differently Peer Lending. Job-hopping is getting popular, and long-term job security falls lower on the priority list. Young people no longer rely on the pension benefits provided by their employers. As the age span is increasing and social security is in flux. Moreover, in this environment where savings accounts, bonds, and stocks and shares are offering low-interest rate investors are looking for options through which they can earn a high rate of returns. Young people are also looking for ways through which they can make and save more money. Most of them are interested in non-traditional investment options like Peer to Peer lending.

Here are some reasons why young people want to invest in P2P lending.

P2P Lending Is More Tech-Driven  

Many young people distrust banks, and they find their services and financial system outdated that does not apply to modern-day situations. Young people are the generation that is grown up in the digital age; that is why they are attracted to tech-driven services. P2P lending happens through online platforms, making it easy to create accounts and lend across borders to earn interest.

They Prefer to Cut Out Banks 

Young people are massively distrusting traditional financial institutions and banks. Because the interest rate for investing in bonds or savings accounts is very low, they are not appealing to people who want to save money. Other than that, they have to pay more overhead charges when they invest through banks in traditional loans. In P2P lending, there is no bank or middleman involved. Millennials are attracted to P2P because of low overhead and high interest.

High Returns 

In contrast to traditional bank loan peer to peer lending offers a flexible platform for investors and borrowers. Investors can set their criteria and choose the borrowers according to their criteria to earn a high investment return. However, keep in mind the more the interest rate more will be the risks.

Easy to Build Diverse Portfolio 

P2P investment offers to create a diverse portfolio by investing in different types of loans instead of investing in a single loan. This diversification reduces the risks and favors high returns. When you spread your investment across multiple loans credit risk is reduce, if one loan goes go bad you can still earn profit from other loans.

Easy to Build Diverse Portfolio 

Tax-free Interest

Another thing that makes p2p lending attractive for young investors is tax-free allowance. If you have an Innovative Finance ISA account, you can invest your tax-free allowance in peer-to-peer lending and can earn tax-free interest. Basic rate taxpayers can earn up to £1,000 and high rate taxpayers can earn £500 tax-free profit.

Basically, the young generation wants to embrace innovation. Peer-to-peer lending is considered a novelty in the finance industry. Thus, it is a perfect option for the young generation to dip their toe in this investment and gain experience. Be mindful of choosing the right peer-to-peer platform so that you can invest efficiently.For more information you can also read https://businesscutter.com/.

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