One-on-one lending: a money-making trap or financial innovation?

When discussing p2p-кредитование of физические лица, many are attracted by its seemingly simple prospects—bypassing banks and directly lending to individuals. However, this seemingly “democratized” financial model hides risks far greater than traditional bank loans.

The Truth Behind the Appearing Promises

p2p-кредитование физических лиц, as an emerging fintech solution, has attracted a large number of participants since its appearance in 2005. This model removes traditional financial institutions as intermediaries, allowing individuals to lend to each other directly, with the platform responsible for matching borrowers and investors.

Sounds good? That’s where the problem lies. Research data shows that the default rate on one-to-one lending platforms exceeds 10%, a figure much higher than traditional banking institutions. In other words, if you invest $1,000 on such a platform, you might lose $100.

Why p2p-кредитование физических лиц is so dangerous for borrowers

Although one-to-one lending platforms promote themselves as revolutionaries of “social credit” or “crowdfunding,” their interest costs are an uncomfortable reality. In comparison, traditional bank loans have much lower interest rates.

Most individuals turning to p2p-кредитование fall into a vicious cycle: they are usually those struggling to make ends meet from paycheck to paycheck. Facing sudden emergency expenses, they are forced to accept high interest rates, leading to a debt spiral that may eventually become unpayable.

Investors shouldn’t think they are safe either

As an investor, you might think earning interest through p2p-кредитование физических лиц is a good choice. But this assumption overlooks a key issue: borrower default. Platforms cannot conduct strict credit checks like banks, which means once your money is invested, it’s very likely you won’t get it back.

In contrast, traditional savings accounts or certificates of deposit (CDs), while offering lower returns, at least guarantee the principal.

When to consider one-to-one lending

Honestly, most people should never venture into the p2p-кредитование field. The high interest costs and default risks are too great.

Only when you face a real emergency and have no other options should you consider this type of lending. But even then, you should be fully aware of the financial risks you are taking.

P2P lending is an innovation in fintech, but its essence is: the convenience comes at the cost of higher risks and more expensive costs. Think carefully before making any decision.