How Does P2P Lending Risk Compare to Traditional and Alternative Investments?
When it comes to investing, potential returns are naturally a key consideration — how much can your capital grow? But just as crucial, especially in 2025, is understanding the risk involved. This year, traditional markets are under significant pressure. Stocks and ETFs are undergoing corrections, and cryptocurrencies have once again experienced steep declines. As a result, more and more investors are asking: Where should I invest in 2025? And where can I find real stability for my portfolio? In this article, we’ll explore how peer-to-peer (P2P) lending compares in terms of risk to other major asset classes — including stocks, real estate, crypto, bonds, and even niche investments. But first, a quick refresher:
What is P2P lending?
P2P lending is the abbreviation for peer-to-peer-lending. Initially, it started out as people needing a loan and offering a certain interest rate. A pool of people could then lend the money and get the interest in return. Having collateral was unusual.
Nowadays, the process is more streamlined. P2P lending happens mostly on platforms like Lendermarket, where loan originators offer their loans to invest in. The loan originators are companies offering loans to consumers or businesses. So in a sense, you borrow the loan originator the money, and this brings benefits with it, like being able to gauge their ability to pay back, them offering a buyback guarantee and more.
How is P2P lending different from other methods of investing?
P2P in the form we know is a quite new concept, compared to things like stocks or bonds. Nevertheless, it shouldn’t be overlooked and can be a good complementary way to make your money grow. The main difference between P2P lending and investing in other popular assets is that with P2P lending, you always know how much you will earn — it is a form of fixed-income investing.
P2P lending vs Stocks
The stock market is one of the oldest ways of putting your money to work. You have companies that issue stocks, and you can buy shares of them. The companies on the stock market have to publish annual reports and are usually big corporations, so you have good ways to investigate each company before you invest in it. There’s also a plethora of different financial products with which you can participate in the stock market. You could buy shares directly, buy an ETF, invest in a fund and much more. It’s a very liquid market as well, and you can buy and sell shares usually at a seconds notice during the opening hours of the exchange. The average return of the S&P 500 since 1971 is above 10%. Don’t expect 10% year over year, though, as it can be a wild ride with years that make double-digit minus and plus returns.
Compared to stocks, investing in P2P is not quite as versatile. There are many platforms to choose from and even multiple loan types (consumer, business, real-estate backed), yet compared to the giant that is the stock market, everything pales in comparison. However, the performance can be better, with loans offering up to 12—18%, which you get annually. Usually, that also means waiting for the loan amount to be repaid, so it’s not as flexible. Sometimes the due date of loans can also be extended, but you continue to earn interest even then, and Lendermarket has 0% defaulted loans to date. Some P2P platforms offer secondary marketplaces that make the investment a bit more flexible, as you can sell your investments before they are due.
Stocks
P2P lending
Returns
Medium – high
High
Barrier to entry
Low
Low
Liquidity
Very high
Low
Volatility
Medium
Low – none
Fees
Low
None at Lendermarket
P2P lending vs Real Estate
Probably even older than buying stocks are investments into real estate. You buy a house or land, wait for develop it and sell it for profit. Traditionally, one leveraging factor with real estate investments is that you can take out a loan from the bank enabling you to invest more money than is actually yours. Depending on your area, timeframe and luck, real estate can be very lucrative. Imagine buying apartments in New York City 50 years ago and selling them now. Even buying and renting out can provide a fair income.
One should not forget the risks, though:
- You could have bad tenants
- Interest rates could rise making the investment unprofitable for you
- Environmental factors could change, making the location undesirable
It’s also the nature of real estate investments that they are highly illiquid. Furthermore, you lock a large chunk of your net worth to one specific asset, increasing your cluster risk. If you like real estate investing, you can also use P2P lending to participate in it in a much safer and less condensed way. For example, on P2P marketplaces, some of the loan originators provide real-estate backed loans. These are loans where the borrower puts their real estate as collateral, increasing its security. Investments are possible from just 10 EUR.
Real Estate
P2P lending
Returns
Medium – high
High
Barrier to entry
High
Low
Liquidity
Very low but physical product
Low
Volatility
High
Low – none
Fees
Low
None at Lendermarket
P2P lending vs Cryptocurrency
Cryptocurrency is a bit tough to explain technically. Financially, though, many people view it as a way to become rich very fast. But as you know, if something offers massive upsides, it also offers considerable downsides. From 2010 to 2025, the cryptocurrency Bitcoin had a Compound annual growth rate of 103.49%. To be fair, it’s probably even higher, as Bitcoin started trading at less than 0.10 EUR per coin and is now above 80,000 EUR. You can see that the gains can potentially be astronomical. However, so are the risks. There are many coins that promise you to become rich overnight, and eventually make you lose money. It’s an unregulated market where you are the custodian of your coins. If you don’t take enough care, it’s easy for hackers to funnel away your funds.
Let’s also not forget the rollercoaster ride that is crypto. There have been multiple occasions where the price of bitcoin rose, only to dump 60—80% again after a few months. If seeing your stock portfolio in the negative already makes your knees jitter, then these extremes will make you sell low and buy high. With P2P lending, the money comes in steadily, month by month. Your account balance rises slowly, and unless there is a payment default (which a buyback guarantee saves you from), it won’t reach negative.
Crypto
P2P lending
Returns
Very low – very high
High
Barrier to entry
Low
Low
Liquidity
Usually high
Low
Volatility
Extreme
Low – none
Fees
Low
None at Lendermarket
P2P lending vs Bonds
Bonds are, depending on the issuer, one of the safest ways to invest your money. If you invest in government bonds from AAA-rated countries, there’s almost no default risk. It’s a bit different if you buy bonds from private companies or countries with worse ratings. In general, bonds offer low but predictable returns. They have a coupon value through which you know how much you will have earned once the bond matures (runs out). There’s also a gigantic secondary market where you can buy and sell bonds, if you ever need to liquidate your reserves.
In terms of traditional assets, bonds are the one that are most similar to P2P lending. With P2P lending, you know the interest rate of the loan you invest in, you know how long the term is, and perhaps there’s even a secondary market. You can look up loan originators to assess the probability of loans being paid back and choose different loan types.
Bonds
P2P lending
Returns
Low
High
Barrier to entry
Low – medium
Low
Liquidity
Very high
Low
Volatility
Low – none
Low – none
Fees
Low
None at Lendermarket
P2P lending vs Art / Niche Investments
Investing in artwork is often portrayed in movies as a way for rich people to invest. The important thing with art investments, or any niche investments for that matter, is that you need to be very knowledgeable about what you buy. Without expertise, investments can go horribly wrong. With the proper experience, however, you could find a nice way to make gains beyond what you would usually find on the capital market. It doesn’t even have to be art, you could also buy Lego® sets on release and then resell them later once they’re not being produced anymore. The market is rather illiquid, though, as there is no digital trade and not many central marketplaces for these assets. In the worst case, you are left holding the bag.
With P2P, the background knowledge needed to make a sound investment is less. You need to understand how it works and read up on the loan providers, but after that, the learning curve falls off rapidly. Also, the loans have a fixed end date, so you won’t get stuck with a loan nobody wants to redeem.
Art / Niche Investments
P2P lending
Returns
Low – very high
High
Barrier to entry
Medium – high
Low
Liquidity
Low
Low
Volatility
Low – medium
Low – none
Fees
Low – medium
None at Lendermarket
How risky is P2P investing?
To wrap up the whole topic, let’s recap. P2P is a pretty new form of investing, which can typically offer high returns with low barriers to entry, due to being able to start investing in loans with as little as 10 EUR. The volatility is also quite low or even non-existent, as the loans have a fixed value with fixed interest rates and a fixed end date. However, loans and their due date can be extended, more on that here.
The downside is that P2P investing can be rather illiquid if the platform or marketplace doesn’t offer you a secondary market. Loan terms can be chosen as short as 30 days, so you have reasonable ability to plan ahead, yet if you need the money in between, then without a secondary market, you will need the loan term to end.
Compared to most assets, the potential returns are higher, while also offering more stability. All in all, P2P loans can be a good add-on to a portfolio that seeks to increase its gains while limiting exposure to risk factors.
This content is for informational purposes only and does not constitute financial advice. Always conduct your own research and consult a qualified financial advisor before making investment decisions. Past performance is not indicative of future results and investing involves risks, including possible loss of principal.
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