The title doesn't describe the full picture so I would like to give some more background information.
So basically I've been aware of the p2p lending existence but I've always been somewhat hesitant to put money online no matter what the investment is.
The platform that I'm considering is operating in eastern/central Europe and a lot of the credits that are offered are small credits (like between 1/2 to 1 average monthly salary). The percentage for these credits when they are not overdue or with some other problems are around 5.5%. Some of the companies that offers to buy credit from them are well known in the countries they operate which gives me a little more assurance that most of the credits will be collected.
So basically the main pros that I see are:
I have some personal observations on the companies who offer those credits
The credits that I'm looking to invest into are generally for small amounts (which I guess is both - good and bad). For me this is more of a positive since less money = more likely to be given back. However one can argue that the people who are taking such credits are not exactly the most financially reliable, but again, here comes point 1, that I have some idea how those companies works so I expect them to be able to collect most of the credits they've given
The credits that I am willing to invest to are generally short/mid term (expected time for paying the credit is between 30-60 days) which is important for me in terms that as I've mentioned above, I have some inner struggle to invest money online so being able to invest/collect in a relative short period of time, even if it's not that high of ROI is preferable to me.
So in my mind I have this picture - I put some money into this platform, I buy a credit which, if everything goes well, is paid within 30 to 40 days, after which I happily collect my profit no matter how small it is and make decision whether or not I would like to proceed with this.
However, as everything in life, this sounds too good to be true. If it was that easy - you give some money away for a month and then you collect them with 5% interest then I don't see a reason why all people, especially those with more money, don't just do that? Something changing drastically within 30 days is highly unlikely so the risk doesn't seem that big. You just give some money, and after 30 days you collect them back with 5% interests and then you can do it again.
So what is the problem with this picture? Why are not all credits bought by rich people/companies and just making profits? What are the possible pitfalls/problems that I should be aware of before investing anything?