As investors look for income sources to accelerate their retirement target, Peer-to-Peer (P2P) lending has grown in popularity. P2P platforms match individual lenders directly with borrowers, skipping traditional banks and offering yield rates from 8% to 15% or more.
However, these attractive yields come with high risks. Unlike savings accounts, P2P loans are unsecured debt and not protected by government deposit insurance. Default rates can rise significantly during recessions, and platforms can face insolvency or freeze withdrawals.
If you include P2P lending in your portfolio, treat it as high-risk allocation (no more than 5% of your assets). Diversify across hundreds of tiny loans using auto-invest tools, stick to platforms with buyback guarantees, and prioritize liquidity. Protect your core portfolio so your FIRE foundation stays secure.