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P2P Lending in India – Auto Invest Guide

Written by Dhruv Talreja

Auto Invest as the name suggests is a feature provided by many Peer to Peer platforms in India. P2P Lending in India is proliferating, and with that growth, we are observing few features in P2P platforms in India like auto invest. Auto Invest for P2P lending, allows you to set a few lending conditions. And then whenever a new loan is live, the algorithm checks if your conditions are met and automatically invests a predetermined amount into that loan.

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An example of the auto invest feature is where you set the following conditions

  1. CIBIL Score > 700
  2. Tenure>= 12
  3. Purpose ≄ Personal Use
  4. Loan Amount > ₨.50,000
  5. Stay Type ≄ Rented
  6. Maximum Investment = Rs.1,000/-

How does Auto Invest Work for P2P lending in India?

You set the conditions as mentioned above and then fund your online escrow account and leave the auto invest to do the hard work.

Now the auto invest feature will come into work whenever a new loan is live for investment on the platform. It will check to if the conditions are present in the loan and if they do, it will automatically invest in p2p lending according to the maximum or minimum amount you have set in the lending criteria. This way you don’t have to select and invest in p2p loans every time manually. It also improves the chances of you funding the p2p loan given that now p2p loans get funded in minutes.

Auto invest as a feature can be very useful when lending large sums of money, it helps provide diversification and eradicates the manual intervention. As the demand for this investment product is growing in India, loans are now getting 100% funded usually within minutes of going live on the platforms. Thus auto invest as a feature will allow you to be at ease and pick investments even when you might be at work in your boss’s cabin. It eases your efforts to invest in P2P lending. However, there are some points which you should consider before opting for it. 

P2P Lending India – Auto Invest Tips

When using auto invest, it shall ask you to set the parameters to auto pick p2p loans and invest in them. However, when you are starting your investment journey, you might not know the right parameters to choose and invest. Thus, I recommend to manually pick loans by self-assessing them in the start and analyse the returns and repayments over the next 3-4 months. Once you see the repayment pattern and returns, it would be wise to filter out those conditions and set them up in auto invest to replicate the strategy over a possible larger investment.

Adding too many conditions in your p2p auto invest parameters would drastically narrow down your options and would not offer you many investment options. You might have to wait for days sometimes to get an opportunity to fund a p2p loan. It necessarily means that you should keep your lending strategy that is not extraordinarily confined and it does not have necessary conditions just for the sake of it. Sometimes it helps to keep things simple.

Parameters to set conditions while using auto invest for investing in P2P lending

Loan Amount 

 You can choose a minimum and maximum loan amount when investing using auto-invest in a p2p lending company in India.

CIBIL Score 

This is an essential factor while investing in peer to peer loans, however, it is not the only factor. We believe that CIBIL scores above 750 are generally good borrowers. I agree to that; however, you should keep in mind that majority of the borrowers coming to P2P platforms in search of loans are those who have had a troubled credit history or low CIBIL scores. Thus you should choose a category for which you are comfortable. I set this filter to CIBIL Score being higher than 650.

Tenure 

Tenure is yet another vital factor to consider while making your investment decisions. P2P platforms in India are yet not as developed as in the USA; we still don’t have majorly operational secondary platforms where we can sell our P2P loans and get liquidity. You can’t exit your loan once you have invested in it and it has gone into the repayment phase. Thus consider the tenure as per your capital requirements ad the reason for investing. If your main aim is capital appreciation, then you might want to consider long-term loans having mandates like 2 – 3 years.

Risk rating 

Majority of the P2P platforms in India have made their internal risk rating system and provided you with an option to select the one you want to invest. E.g. a platform likes to classify their loans in one of the eight categories they have. You might not want to fund the ones with low rating due to their unstable repayment behaviour, so you don’t choose them.

Employment Type 

This feature allows you to pick borrowers as per their employment type which can be broadly classified into salaried and self-employed. We observe that sometimes people who are Self-Employed may have unstable cash flows and might delay their EMI payment. Thus this is another crucial factor while formulating your auto invest strategy.

Stay Type 

Stay type is a parameter that I don’t find much useful however it should be on some auto invest filters. You might not want to fund those loans whose borrower stay in a company provided accommodation, so you will have an option to remove it and not fund it. Similar options are there for the many possible stay types.

Purpose 

An essential factor while investing in peer to peer loans is to see the purpose of the loan. The list is long, and people might borrow for diverse reasons which would include home renovation, medical emergency, car purchase, rental deposit, two wheeler purchase and sometimes provide a vague reason like ‘personal use’. I am uncomfortable funding such loans and have stricken it off on my auto invest filtering strategy.

EndNote

These were a list of broad filters you might be provided on an auto invest feature for P2P lending online. You should consider and weigh the pros and cons of applying each filter before deploying it. Also as I mentioned above, it would be beneficial to try and manually pick loans and understand the repayment of those loans and filter out the investment strategy that suits you. Once you discover your golden recipe, you must consider the auto invest feature for P2P lending and replicate it. In case you are confused about the mistakes that you should avoid for investing in P2P, you can read 5 Common Mistakes Lenders Make.

Thank you for reading. If you like the article please share and in case you have any doubt related to p2p lending in India, please comment down below or visit LearnP2P to learn more. Also, read 11 Tips To Keep In Mind for P2P Lending India.

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Dhruv Talreja

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