How risky is P2P lending, and what can go wrong?

The main risks, from the most visible to the most overlooked:
- Borrower default: a borrower stops paying. Spreading across many loans reduces the impact of one default but does not remove it.
- Late payments and delays: money comes back later than planned, which lowers the return per year.
- Lender (originator) risk: on loan marketplaces you often buy notes backed by loans of a lending company, and your claim is against an intermediary, not the borrower. If that lending company gets into trouble, payments to investors can be affected, and its buyback promise is only as strong as its finances.
- Platform risk: the platform itself can close.
- Liquidity: money is usually locked in until the loans are repaid; selling early may be impossible or at a discount.
- Returns below the offer rate: the rate shown is what the borrower or lender promises, not what investors end up receiving.
P2P loans are not bank deposits and are not covered by deposit guarantees. Capital is at risk: crowdfunding investments are not covered by deposit guarantee schemes, can lose part or all of their value, and may be hard to sell before the end of their term.