I’ve been talking about Peer-to-Peer (P2P) lending for awhile now. To me, it’s a great alternative to traditional banking and other less favorable investment methods because it gives you full control over a digital platform. But, I get why some people might be hesitant about it. Since it’s a relatively new concept and not everyone understands it well, those concerns make perfect sense. I want to be upfront about some potential security risks you might face when exploring P2P lending.
First, imagine if big names in the industry, like Prosper or LendingClub, suddenly stopped operating. This could be a nightmare, especially for big investors who could struggle to manage hundreds of ongoing loans. Thankfully, these platforms have prepared for such scenarios. For instance, LendingClub has a deal with Portfolio Financial Servicing Co., a large debt collection agency. They would step in to recover any outstanding loans if LendingClub shuts down unexpectedly. It’s not a perfect solution, but it does provide some peace of mind knowing there’s a backup plan.
Another issue is the lack of government guarantees. Unlike savings accounts, which are protected by FDIC insurance, there’s no such coverage for P2P loans. Investors on these platforms take on the risk themselves, choosing borrowers with varying levels of risk based on their interest rates. The U.S. government treats P2P lending as a legal investment, so there’s no protection if a borrower defaults. Without FDIC coverage, you’re using the platform without the usual safety nets.
Online security is another concern for anyone involved in online financial transactions. When using a P2P lending platform, all your information is stored digitally. It’s crucial to stay vigilant and use secure financial practices online, like setting strong passwords and updating them regularly. Make sure your antivirus software is current and run frequent virus scans. Also, avoid sharing sensitive personal financial information.
While P2P investing has its risks, I don’t think they’re much different from other current investment options. Personally, I find the stock market more worrying than P2P lending at the moment.
What’s your take on all this?