Yieldstreet vs. P2P: What’s the Difference?

Peer-to-peer lending, commonly referred to as P2P, is an increasingly popular strategy among online investors. In recent years, platforms like Upstart and Prosper have brought the P2P lending model into the spotlight, and naturally many people just getting started on their investment journey might be curious as to what it’s all about, and how it differs from the asset-based alternative investment model of Yieldstreet.

Let’s take a closer look at the strategy and mechanisms behind P2P lending platforms, as well as how they compare to Yieldstreet, in order to help you decide which model might be the better fit for your individual portfolio.

What is P2P Lending?

P2P lending is an alternative method for acquiring or providing a loan, allowing borrowers to seek funding from individual investors rather than traditional financial institutions. For investors, P2P can be a great way to observe higher-than-usual returns on simple cash investments, and it can provide borrowers with access to loans that they might have difficulty securing from a conventional bank. 

Most P2P platforms share a similar overall model. Borrowers can sign-up and complete an online loan application, and after being approved and assigned an interest rate—typically based on an assessment of their credit history—they can review various offers from interested investors and ultimately receive their desired loan. Once the loan is accepted, borrowers are responsible for making incremental payments to satisfy the principal amount of the loan plus interest. 

Advantages and Risks of P2P Lending

Investing with a P2P platform has the advantage of producing relatively high returns when compared with other investments or traditional savings accounts, and investors could potentially observe returns exceeding 10%. P2P platforms also give investors control over how they invest their money, which can be advantageous for confident investors who want to diversify their portfolio while maintaining authorship over their individual strategy. And because P2P loans aren’t subject to the same ebbs and flows of publicly traded assets, they are considered less volatile than traditional investments in the stock market. 

However, because P2P investments are personal loans, there is always the possibility of a borrower defaulting or missing payments. And considering that many of these loans are unsecured, and the platforms aren’t covered by FDIC insurance, a default has the potential to be a large loss. 

How Does Yieldstreet Compare?

Rather than funding personal loans, Yieldstreet provides investors with a diverse array of alternative investment opportunities, from multi-asset funds to individual equity offerings in everything from commercial real estate to art and consumer finance. The main similarity between Yieldstreet and P2P lending platforms is that we both provide the everyday investor with an alternative method for income generation; the main difference is that returns on investments with Yieldstreet are based on the value and performance of assets, rather than the predetermined interest rates of P2P loans. Minimum investments in Yieldstreet offerings range from $500 to $15K, with target returns ranging from 10-18% on most offerings.* 

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Advantages and Risks of Investing with Yieldstreet 

Investing with Yieldstreet comes with the advantage of built-in portfolio diversification via access to private, multi-asset class funds that were previously only available to the top 1%. Investing in a Yieldstreet fund is a great way to generate income over time, and the variety of offerings gives investors flexibility regarding their individual risk appetites. In the interest of inclusivity, Yieldstreet has options for both accredited and non-accredited investors, and while each opportunity comes with its own risk profile, Yieldstreet performs its own due diligence, providing investors with the transparency necessary to make an accurate assessment of all offerings.

Although Yieldstreet does offer limited liquidity on certain investments, our platform might not be the best choice for investors who aren’t prepared to wait out the full duration before redeeming their returns. Additionally, while each offering is carefully crafted to benefit investors, Yieldstreet’s available offerings might be limited in comparison to other, more traditional investment platforms.

Still curious as to what might be the better investment strategy for you? Try taking our short quiz to learn more about yourself and how you can get started on your investment portfolio.

*Target returns are offered as opinion and are not referenced to past performance.  Target returns are not guaranteed and actual events or results may differ materially.

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1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest" or "Annualized Return" represents an annual target rate of interest or annualized target return and "term" represents the estimated term of the investment. Such target interest or target returns and estimated term are projections of the interest or returns and or term and may ultimately not be achieved. Actual interest or returns and term may be materially different from such projections. This targeted interest or returns and estimated term are based on the underlying investments held by the applicable.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

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