In India, most people invest money in fixed deposits. Very few people invest in stocks due to unpredictability of returns and risk associated with the stock market investment. If you are in a situation where you are looking to invest in fixed deposits, we would say that you can get better returns using peer to peer lending than fixed deposits without taking much additional risk.

Fixed deposits are a safe investment and offer better rates than a typical savings account. The main selling point of fixed deposits is usually their interest rates and safety. For those few advantages, fixed deposits have many disadvantages compared to Peer to Peer Lending. While the rates are better than a savings account, they are not nearly as good as the rates available through peer to peer lending platform like Lending Chaupal (LC). As per bank bazaar data, the average interest rate of fixed deposits is 9% for 1-year fixed deposits. In comparison, you can expect to earn up to 25% using peer to peer lending through LC.

Another disadvantage of fixed deposits is that your money tends to be tied up and you receive your money at the end of the term. Penalties apply if you attempt to retrieve your principal before the end of your term. Monthly payments that you receive on your peer to peer lending loans include both interest and a portion of your principal.

Despite lower interest rates and longer period before the principal is repaid, many people still invest in fixed deposits. In few cases, fixed deposits may be a right asset class. However, a more informed investor will consider peer to peer lending before making that decision.