P2P Lending vs Stocks

Find out which asset class is the better fit for you.

Stocks vs P2P loans

In this article we will be talking about P2P lending vs stocks, which one yields higher returns and which one is safest. We will be explaining everything you need to know about investing in both P2P loans and stocks so that you can make the decision that’s right for you and determine which you’d like to invest in to grow or diversify your portfolio.

We’ll be covering track records, liquidity, useability, volatility and much, much more to give you a thorough breakdown of both asset classes.

Asset Class

An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Here you can see the main differences between stocks and P2P loans.

StocksP2P Loans
When you invest in stocks, you are investing in the equity of a company and you become a shareholder, also known as equity investing.When you invest in P2P loans, you are investing into claims against borrowers, essentially entering into a loan contract with the borrower, which is also known as debt-based crowdfunding.

Stocks vs P2P Loans - Comparison

Below you can see a breakdown, showing the main characteristics of each asset class and the similarities and differences between them.

CategoriesStocksP2P Loans
Cash flowEvery 3 months, none for non-dividend stocksMonthly, at the end of the loan term for full bullet loans
Capital requirementsLowLow
Know-howModerate - HighLow - Moderate
SecurityNoneDependent on the platform you invest in and ranges from none, to buyback, mortgage, or collateral
FeesBrokerage fees, expense ratio (ETFs) from 0.05% to 2%Secondary market fees 0.85% - 2%, withdrawal fees €1 - €2
Tax treatmentCapital Gains Tax, Dividend tax (you can typically deduct losses from capital investments)Capital Gain Tax, Income tax (0% - 30%) (you can’t deduct losses from p2p in many jurisdictions)
LiquidityHighHigh - Moderate
VolatilityModerate - HighLow

Watch our video comparison between Stocks and P2P Loans. 👇👇👇

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When speaking of return, there are several things you should be aware of, as stocks and P2P loans differ quite a lot here.


By trading stocks, you only make money through dividends or if the value of a company increases.

  • Your return from stocks is not always predictable
  • When the value of stock plummets, chances are that the price will bounce back at some point
  • By investing in companies, you own a share of the company

P2P Loans

  • By investing in loans, you make money from the interest earned from P2P loans
  • Your return from P2P loans is mostly predictable
  • By investing in loans, you own claims against the borrower
  • When a loan defaults, the return is highly dependent on the ability of the lender to recover the debt. The chances of recovering the debt is high if the loan is secured by a mortgageor some additional collateral. The likelihood of fully recovering an unsecured defaulted loan is low

Stocks can potentially provide much higher returns, even over 20% whilst P2P loans typically return 11-12% per year, however the chance of a return is much higher with a P2P loan, and when investing in stocks, although you can make more of a return on an investment, there is also a much higher chance of losing all of it.


Volatility is the unpredictable changes in stock prices and is a very important aspect when deciding where to invest your money. Volatility can be affected by many factors, such as economic crises, public relations, political developments, and changes in national economic policy to name but a few.


  • The stock market is very volatile which increases the chances for higher returns but also higher losses. There is opportunity to make big wins any time, but also higher losses
  • More prone to market volatility due to economic news, geopolitical events, and changes in the financial markets

P2P Loans

  • P2P lending isn’t considered a volatile asset class. The return is determined at the time you invest in one loan and the return on your investment depends on the ability of the borrower to repay the loan as well as the ability of the lending company to collect the debt. The return from P2P loans is much more predictable during normal market conditions
  • External factors like regulators or a financial downturn of markets may lead to higher default rates. P2P loans are not as heavily impacted by geopolitical events and economic news

P2P loans are much less volatile than the stock market, largely due to it being less impacted by external factors. We always recommend studying the company, its management, and its lending practices before you start investing with them.

Track Record - Regulation & Protection Against Frauds

You can see here that P2P lending has only emerged very recently compared to the stock market, but does that make it less safe? See the protection for both asset classes below.


  • + 200 years
  • Companies are regulated by the SEC (Securities and Exchange Commissions) and many other agencies. Brokers are regulated by FINRA (financial industry regulatory authority)

P2P Loans

  • + 10 years
  • Regulation happens on the national rather than global level. For example, in the UK the P2P lending platforms are regulated by the FCA (Financial Conduct Authority) and in Lithuania by the Central Bank. Currently, the EU works on a European Crowdfunding Service Provider License which is distributed by local authorities to platforms that pass the regulatory process

As you can see, both asset classes have regulations. As the stock market has existed for a much longer period of time, the regulations are more of a one-size-fits-all which can be reassuring to investors, whilst P2P lending regulations differ from country to country.

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Time Investment - The Time is Money

Before investing, it’s important to do your homework and learn how the asset class you’re interested in works. It’s important to do this to give yourself the highest chance of success (and the lowest chance of loss) that you can.


Initial Time Investment

Investors should spend some time getting to know how the stock market works instead of blindly investing their money.

  • ETFs are more suitable for passive investors as you diversify broadly across dozens or even hundreds of companies. This option is also the least time consuming
  • Stock picking can be very time-consuming as you need to evaluate whether a company is undervalued or overvalued

Initial Investment For Trading

Depending on your investment strategy, you can spend hours analyzing charts and trying to predict where the price is moving towards and when it’s the best time to invest.

Often beginners can become nervous and make emotion-based decisions to liquidate their portfolios when the price drops, and as a result suffer huge losses.

Initial Investment For Monitoring

Depending on your investment period, monitoring and adjusting your orders can be very time-consuming.

Day Traders, or many investors who trade CFDs lose money.

P2P Loans

Initial Time Investment

Investors should do their due diligence on the platform they plan to sign up to. Researching the management and the performance of the loans will give you a good idea about the practices that the platform or the lending companies are following. This has a direct influence on your expected returns. Investors can expect this option to be more time consuming than investing in an ETF, though less time consuming than picking stocks yourself.

Initial Investment For Trading

You can often automate your investment strategy meaning not much of a time investment is needed here.

Initial Investment For Monitoring

You should monitor your portfolio and the platform on a regular basis to spot early signs of poorly performing loans and adjust your strategy.

Investors who don’t keep an eye on their investments might lose money.

All of these options require a time investment, but which option is best for you largely depends on how much time and effort you are willing to invest to achieve the highest return. You will find some options are more suitable for beginners than others, with less time required and the ability to automate your investment strategy.


Emotions can be high in these industries and that can often lead to people making poor decisions with their investment. Here are some of the emotions that sway investors either way when investing in either asset class.


  • FOMO (Fear of missing out) - buying high
  • Panic selling, impulsive trading - selling low
  • Exciting

P2P Loans

  • Fear of investing in poor quality loans or scams
  • Boring

In both cases, you need to let go of the feeling that your money is at your disposal at any time. You should educate yourself about both asset classes, and once you fully understand the risks, you will be able to make more rational decisions when investing in stocks or P2P loans.

Usability of Trading Platforms

Let’s speak a little about the useability of each platform, and how they fare for beginners.


The complexity of trading platforms depends on your needs. As a beginner, you may wish to start with a trading app like Revolut to gain experience. Once you’ve gained experience, you could move on to an entry-based brokerage company like Degiro that offers a more beginner-friendly interface in comparison to brokerage companies like InteractiveBrokers who target professional traders with more sophisticated tools.

P2P Loans

The sign-up process and navigation on most P2P lending platforms is very easy to use, even for beginners. Once you’ve passed the AML procedures and deposited funds into your account, you can start investing. This process takes up to two days. On certain platforms, you can start investing on the same day. Most of the platforms can be automated and offer you the tools to monitor your investments. If you want to learn more about the features of lending platforms, we recommend watching our P2P lending reviews.


Liquidity is, simply put, how quickly you are able to withdraw your money should you need to. You can see below the liquidity for both the stock market and P2P lending.


The stock market is quite liquid, and you can access your cash almost instantly if you exit your position during market hours.

P2P Loans

Liquidity is dependent on the loan type and the features every platform offers. Some platforms offer instant cash-out options, while others offer a secondary market. An important thing to note is that liquidity is not always guaranteed. If your loans are “in recovery” you cannot liquidate your portfolio and your capital may be locked for months or even years before you can access it.

Diversification Within The Asset

Diversification is a hot topic within the P2P lending space, but which asset class is better for diversifying your portfolio in a safe way? Here we take a look at how the diversification process differs between the stock market and P2P lending.


With the stock market, you have two options. Either, you can invest in mutual funds, ETFs or you can invest in individual stocks and create your own diversification strategy.

P2P Loans

The diversification of your P2P portfolio should be approached differently to the stock market.

It is very easy to spread your money across loans from lending companies that aren’t applying the best lending practices or are operating in countries where the regulatory risk is much higher than the expected return.

Instead of investing all of your money into unsecured loans, you should research the lending companies and invest in loans that are secured by a mortgage.

When choosing your diversification strategy, we recommend downloading the loan book and have a look at the defaulted or delayed loans.

Spreading your investments across one lender, in just one country, where 80% of the portfolio is delayed is not a “safe” strategy.

Diversifying your stock portfolio is much easier than with your P2P portfolio, and especially within the P2P lending space, you should be careful by considering underlying assets, how the loan is secured, the length of the loan term, the recovery rates, and the track record of the company and its finance group.


Lastly we look at support. Whilst we hope you don’t need to access support, it’s reassuring to know it’s there should you need advice or more information when it comes to an investment.


You shouldn’t expect any support within the stock market. Where there is support, it is limited to the functionality of the brokerage account.

P2P Loans

Within P2P lending, there is excellent support on most platforms. You can often access financial reports and statistics about the borrower and we encourage you to do so. As a beginner, P2P lending platforms tend to provide more education than brokerage firms.

Final Verdict

So which is better? Both asset classes have their pros and cons and it comes down to your own investment strategy.

In the long-term, the stock market outperforms many other investments. If you want to invest short-term, investing in P2P loans will give you a predictable return as the volatility of this asset class is much lower than by trading stocks.

Since both asset classes don’t correlate with each other, it’s certainly worth investing in the stock market in the long-run, as well as into P2P loans to bring more stability into your portfolio.

A good piece of advice is to treat both asset classes as long-term investments, but keep in mind the liquidity aspect in case you need to adjust your investment strategy.

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