There are different types of risk that you need to consider when investing in P2P lending.
Counter-party/platform risk – This is the risk posed by the stability of the P2P platform. Vested Edge partners with platforms with a strong track record of providing returns to investors via P2P lending and a strong investor base while managing significant AUM. Your invested funds are maintained via an escrow and trustee mechanism, ensuring that the platforms or Vested never touch your funds. In addition, Vested Edge spreads your investment across multiple regulated platforms, reducing the platform risk
Concentration risk – This is the risk posed by lending your funds to a few borrowers. Vested’s partners provide a high degree of diversification, ensuring that less than your exposure to a single borrower is kept at less than 0.5% of your invested amount. Via Vested Edge, you also gain exposure to various types of loans, such as subvention, personal, and merchant loans. This is possible by partnering with multiple platforms offering different types of loans across different sectors, such as education, healthcare, small businesses, and retail shopping.
Credit risk – This is the risk posed by defaults on loans. Vested’s partners ensure that your exposure is limited to verified and vetted borrowers only. Additionally, many loans come with a guarantee of up to 5% (within the permissible limit as per FLDG guidelines). Vested also regularly monitors the portfolios of our partner platforms and provides you with ongoing reports to track the risk profile of the loans.
Interest rate risk – This is the risk posed by the volatility in interest rates declared by the RBI. With P2P lending, there is minimal correlation to the interest rate movements, which results in lower volatility of your investments.
Alignment with investors – This is the risk posed where the interests of lending platforms are not aligned with those of the investors. All our lending partner platforms do not earn any income till you receive your full capital and indicated yield. Vested continuously works to ensure that your interests are always kept first and protected.