It's possible, but not necessarily. You'd have to check on what the load is on the server and if there are enough writes to cause a problem.
It's also a poor idea for disaster recovery. If that drive fails, you lose your backups and data. Backups should be moved.
As far as performance, you have to determine what your bottleneck is. Is the CPU pegged? Do you have memory pressure? Disk throughput maxed? Indexes not set properly on tables?
It's too much to list here to check. What you would want to do is start searching for those issues, determine if any of them apply and work on mitigating them.