Is P2P lending ethical? How to invest sustainable in P2P loans
P2P lending is not unethical in itself, as both borrowers and lenders can benefit from using it. This means that P2P lending in itself is ethical. But some aspects of the industry could and would be considered unethical by many.
A lot of the loans funded via the P2P lending platforms are personal loans or short-term loans where the borrowers have bad credit scores and pay high interest rates. The APR range can sometimes be as high as 100–400% for the borrower.
Some examples of platforms where the borrower is charged a high APR are Lendermarket, Swaper, and Esketit.
Using P2P lending platforms can also be considered unethical by some religions. In Islam, for example, some of the parts of P2P lending could be considered halal. Therefore, some companies have made shariah-compliant and Islamic P2P platforms. So if you are a Muslim, you would probably want to take a look at these.
In recent years, the demand for ethical investing has been on the rise. The demand for ethical investments also affects the P2P industry. So, how do you invest in the most ethical way in P2P loans?
How to invest ethically in Peer-to-Peer lending
If you want to invest in the most ethical way in Peer-to-Peer lending, you should probably avoid consumer lending platforms like Mintos and PeerBerry.
With consumer lending platforms you are not sure whether or not the consumer will end up in a bad situation due to loans with high APRs.
If you are generally looking for the most ethical P2P lending platforms, you should probably go with the business and real estate crowdfunding platforms, as investors here are primarily earning money by lending money out to business people that are developing the world.
Some of the P2P lending platforms that are helping small businesses and real estate developers include ReInvest24, EstateGuru, and Debitum Network.