Hi there,
The amount of risk involved in peer to peer lending depends, in part, on the amount of interest you want to earn. Low-risk loans to borrowers with good to excellent creditworthiness generally deliver low yields (1% - 3%), while loans to borrowers with average to poor credit deliver higher yields (4% - 10%).
In any case, lending to private investors involves more risk than lending to a bank (by depositing money in a bank account) because your assets are not guaranteed. Assets deposited into Swiss bank accounts are guaranteed, up to certain limits, by the Esisuisse depositor protection scheme.
While some peer to peer lending platforms require borrowers to take out life insurance or payment protection insurance, this only insures against certain hazards (death, unemployment or disability, for example). If borrowers default for other reasons or are deemed ineligible to receive insurance benefits, you can lose the full outstanding loan principal and interest. Even lending to borrowers with excellent creditworthiness only does not provide a 100% guarantee against default.
It is best to look at peer to peer lending as a medium-risk investment activity, similar to investing in high-yield stocks and bonds. If you cannot afford to lose money under any circumstances, savings accounts and medium-term notes provide a more secure option because investments are protected by depositor protection and the chance of banks defaulting on their loans is statistically smaller.
Best regards from Moneyguru
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