P2P Lending vs Gold-Backed Investment — Which Is Better?

P2P lending platforms in India advertise 12–18% returns, but the net return after defaults is significantly lower in practice — industry default rates on P2P platforms range from 5% to 15% depending on the platform's credit quality. Gold-backed lending at Pawnbazar offers a fixed 12% annualised return with no credit default risk: the borrower's gold is held as collateral and can be sold to recover principal if the loan defaults.

For the broader picture on passive income investments in India, read our monthly income investment plan guide.

P2P lending in India is regulated by RBI under NBFC-P2P guidelines, but investor funds are exposed to borrower credit risk — if a borrower defaults, recovery is uncertain and often partial. Diversification across many borrowers helps but doesn't eliminate this risk. Gold-backed lending eliminates the credit risk vector entirely: the collateral is physical gold, independently valued, and held in custody throughout the loan term.

P2P lending's headline rates are attractive but the risk-adjusted return, after provisioning for defaults, often lands below 12% — comparable to, or below, gold-backed lending. For investors prioritising income reliability over maximum theoretical yield, gold-backed investing is the stronger choice. For more on how gold loans compare to gold investments generally, see our gold loan vs gold investment comparison.

Start investing on Pawnbazar and earn fixed 12% returns backed by physical gold collateral.