How to Invest in Peer-to-Peer Lending: Top 4 P2P Lending Sites in the Philippines

Last Updated on – Feb 27, 2023 @ 3:00 am

Have a few thousand pesos sitting around, doing nothing?

Looking for a better rate of return for your money?

You’re in luck—in this comprehensive guide, we’ll show you what P2P Lending is and how it can earn you a significantly better ROI compared to other investment vehicles.

What is P2P Lending?

Peer-to-peer lending or P2P pools money from its members/investors and lends them to borrowers.

Unlike a traditional bank format wherein the bank is the exclusive source of funds for the borrower, P2P lends money chipped in from a group of investors.

There’s also the option to fund the whole loan by yourself, if you want (investor).

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How does P2P Lending work?

In a nutshell, it’s essentially your typical “Paluwagan” with a few modifications. However, instead of simply taking turns in getting lump sums of accumulated cash from participants, you earn from it via interest gained by the money you lend.

P2P lending classifies participants into 2 groups: Lenders and borrowers.

Lenders: Investors. They fund the capital needed by the borrower. The money is then pooled or combined in order to accommodate varying amounts of capital to be borrowed.

Borrower: Borrows money from investors/lenders.

It’s similar to how a mutual fund works. P2P allows you to be an investor even if you don’t have a lot of money to invest with. But instead of pooling your money with others in order to buy stock, P2P combines it with money from other investors then lends it to borrowers.

P2P differentiates itself from Mutual Funds, however, by having the option of funding the whole loan by yourself (investor). You also get to pick investments on your own.

Furthermore, gains are not based on the performance of your investment in the stock market. You earn via interest paid by the borrower.

Related: Online Loans: 17 Best Online Lending Companies in the Philippines

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Why invest through a P2P Lending platform?

Better rates of return for your money

The average interest rate for a typical bank savings account is 0.25% per annum.

If you had Php100,000 invested, in a year your ROI (return on investment) is 250 pesos. Just enough to buy you an Amazing Aloha burger meal from Jollibee.

Hey, I like that burger, but as an investor looking to earn decent ROI, the bank is definitely not the place for me.

Compare that measly return with an average return rate of 10-15% from P2P (for FundKo, for example) platforms, you’re looking at a Php10,000 ROI in a year assuming a 10% return via interest.

That’s a hell lot of Amazing Aloha burgers! Clearly, all rates are not guaranteed but I know you get my point.

The option to diversify your investments reduces risk

With P2P platforms, you can spread out your investment across multiple loans.

What will this accomplish?

A diversified portfolio makes use of the law of averages—so even if one or more of your investments give a negative ROI, your other winning picks can “even out” your returns overall.

Potential passive income stream

With a regular savings or even MF account, you’re money is essentially tied (if you’re starting out).

Why? Because you have to let it sit there in order to accumulate any significant returns.

Especially if you don’t have that big of a capital to begin with. P2P lending platforms have the option to give you a monthly payout from your investments.

Sure, MFs can do that too but then again, P2P presents a faster opportunity to set a passive income source due to the higher ROI (per current P2P lending averages).

Low barrier entry investment option

How much do you need to start investing?

For as little as Php5,000, you can start funding loans from borrowers then start building up on your investment as your ROI grows (when you reinvest the earnings).

Compared to stocks, this feature makes it more enticing to first-time investors looking to test the waters.

Tends to be “faster” in reaching significant gains versus MF or banks

As mentioned earlier, the ROI advertised on these P2P platforms allows you to build up your earnings and assets faster (as of this writing, at least) compared to Mutual funds or regular savings account.

Even the current rates of the best personal savings accounts offered by banks right now seem to be no match in terms of yearly ROI from P2P (based on averages posted on P2P sites).  

Related: 8 Best Online Investment Platforms in the Philippines

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Pros & Cons of P2P Lending Investments

Pros	Cons
Potential for better returns	The possibility of borrowers defaulting is still present
Allows you to diversify your investments	Interest is taxable (if not done automatically by the P2P platform, it is the responsibility of the lender)
You get to pick which loans you want to fund	Your capital may not be invested at all times (see tips below for advice)
Ability to access your money at quickly
Requires little money to start with
Process if setting up an account is easy
Monthly gains can be a form of passive income

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Top P2P Lending platforms, companies & websites in the Philippines

1. Blend PH

Blend PH is an online peer-to-peer funding platform that is managed by Inclusive Financial Technology, Inc. 

The platform offers several loan products (including salary, seafarer, and franchise loans), in which investors/lenders can invest as low as P5,000 – and earn through interest income (ranging from 6% – 30% per annum).

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2. SeedIn

The largest business financing platform in Southeast Asia, SeedIn connects local businesses that need short-term loans with individuals and businesses looking for short-term investments. That makes SeedIn a peer-to-business (P2B) platform for lending and investment. 

SeedIn offers attractive benefits to retail and institutional investors, including competitive annualized returns starting at 7%, short-term tenured investments ranging from one to 12 months, and monthly interest pay-outs.

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3. Acudeen

Providing liquidity for your account receivables—that’s what Acudeen offers to members who sell “invoices” in their platform.

The unique thing about their platform is that it’s focused on helping SMEs maintain cash flow for running their business. As an investor, you can purchase invoices sold by SMEs which in turn can yield better rates than your typical bank savings account.

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4. Lend PH

The site looks similar to job posting boards where you post your needs (if you’re a borrower) and then wait for a lender to fund your loan. The site does not look very stringent though in terms of verification of its borrowers and lenders.

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Bonus: Kiva.org

The PH-section of this non-profit organization’s page shows loan requests from fellow Pinoys mostly needing funding for their businesses.

With as little as $25, you can help fund a fellow Filipino’s capital so they can operate their business (and climb out of poverty).

Note: The platform’s mission is to help change lives by making 0% interest rate loans available to its borrowers. So this is not necessarily an investment. 

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Tips to Succeed in P2P Lending in the Philippines

1. Do your due diligence

As with any form of money-making investment, it all starts with knowing what you’ll be getting into. Keep in mind, this is not a get-rich scheme.

At the very least, read about how the whole system works (since you’re reading this, you’re off to a good start), compare lending sites, factor in all personal preferences (site’s user interface, ease-of-transaction, etc.,).

If you can, seek help from other experienced investors through groups or meets.

While not everything or everyone will be helpful, it may give you better insight on how to approach investing in P2Ps.

2. Start small

One of the main reasons why P2P looks appealing to investors is the low entry point requirement.

Imagine, even if you only have 5 or 10k in cash, you can start investing and have decent rates of return for your money.

The added benefit of being able to help others makes it even better.

3. Know thyself – how much risk can you tolerate?

“The greater the risk, the greater the reward” as the popular quote says.

But it really varies from one investor to another, so just because you’re friend thinks a particular loan will yield terrific results means you should follow suit.

Don’t listen blindly to advice, especially when there’s money involved.

As yourself, “what’s my risk tolerance?” “Am I more of a conservative type, risky, or something in between (moderate)?

Doing so will help you set the tone for your investing principle and keep you within your operating methods.

It helps avoid spur of the moment decisions which may lead to a loss.

4. Diversification is key

Betting all your funds on just one or a few loans may yield better returns—but it also heightens the risk of netting a loss.

The reason why mutual funds are popular (aside from the low entry point) is because your money is invested across several investment choices/vehicles with the goal of mitigating or lessening the risk.

Unless you’re a very risky-type of investor, diversification should definitely be considered as an investing philosophy.

5. Earn then reinvest

Any true successful business person will tell you that part of their success can be accounted to their ability to fight the desire to “cash in” immediately on their earnings.

Amazon founder and CEO Jeff Bezos, for example, is known for his stringent nature in spending their earnings.

This allowed him to reinvest the money back into growing Amazon into the global ecommerce behemoth that it is today.

From an investing standpoint, perhaps you can reinvest the money first until you reach a certain amount where the earnings can serve as a form of passive income source.

Otherwise, it will rob you of the potential to really rake in significant returns brought about by a larger asset pool.

6. Make sure you don’t have funds lying around (uninvested)

You should make it a habit to regularly check potential deals or loans that aligns with your investment philosophy.

This will help keep your capital “active” and not sitting around on your e-wallet doing nothing.

Money not being invested results to “opportunity lost” that could have otherwise been invested and resulted to a gain.

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P2P Lending FAQs

Still got questions about P2P Lending? We’ll discuss them below.

What are the risks associated with P2P lending? 

The main risk of P2P lending is the possibility of default. P2P lending works by pooling the capital of many lenders, and the lenders only get paid if the borrowers pay his/her obligations.

How does P2P lending differ from traditional lending models? 

Traditional lending is based on a relationship between the debtor and creditor, which is usually a large institution. This can be highly inaccessible to millions of budding entrepreneurs who don’t have access to banks.

P2P lending eliminates many of the issues associated with traditional lending. It serves as a platform in which borrowers and lenders connect to one another.

Not only that but P2P lending is dubbed as a solid middle ground between the accessibility of the informal lending market and the inflexibility of conventional finance.

What types of loans are available through P2P lending platforms? 

P2P lending platforms offer a wide array of loan products. These range from personal loans, business loans, student loans, and even home loans.

How do P2P lending platforms assess the creditworthiness of borrowers?

P2P lending platforms usually follow internal and external credit assessment models when checking a borrower’s creditworthiness. Most platforms also have risk assessment analysts on board. 

How are interest rates determined in P2P lending? 

The platforms tend to deal with riskier borrowers. This means they can charge higher interest rates to compensate. If the borrowers don’t have a risky credit score or repayment history, the interest rate will be decreased.

What are the fees associated with P2P lending? 

This depends on your platform of choice. Aside from the 6% to 30% interest per annum, borrowers may also need to settle an administrative fee which is 1% to 8% of your approved loan amount.

What is the typical loan term for P2P lending? 

The loan term depends on the borrower’s preference, but expect it to be between 6 and 36 months, or more.

What happens if a borrower defaults on a P2P loan?

P2P loans are unsecured. Meaning, you can’t go after the borrower’s asset if they default on the loan. That said, the borrower will be charged late fees until they repay the loan.

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