Have you ever heard of peer-to-peer lending?
In a society that's governed by the big banks, peer-to-peer lending offers great opportunities to borrowers who might not get a conventional loan approved, and to lenders who are looking for a good opportunity to grow their money.
Essentially, peer-to-peer lending internet platforms allow you to serve as a small bank – they put you in touch with thousands of borrowers and you can choose where to invest. The criteria are entirely up to you. The potential for earning, however, is substantial – larger than savings and even the stock market, and with fewer pitfalls.
Jeff Clements started small back in 2009 – his first tentative attempts at making money with peer-to-peer lending weren’t stellar and he ended that year with a loss. However, after adjusting his tactics he’s been able to make $10,000 in peer loans over the last 5 years and his return rate is close to 12% now.
Who Can Dabble In Peer-to-Peer Lending?
Peer-to-peer lending is growing in popularity over the last couple of years and almost all States in the US now allow you to participate in that market as a financier. Your background doesn’t matter – you don’t need licenses or permits to do it, you just have to be approved by one of the many peer-to-peer lending platforms you want to work with.
Also, you don’t have to have thousands in your bank account to do it. Minimal investment is often around $25 so you can give it a try without exposing yourself to too much risk.
However, keep in mind that this line of investments does carry certain risks – no one guarantees that your money will be returned and borrowers can default on their loans. I wouldn’t recommend making large investments if you’re not good at screening people and don’t have any business skills.
Ways to Do Peer-to-Peer Lending
Not all sites are created equal – peer-to-peer lending is becoming more specialized with some platforms focusing more on one type of loans than the other.
Personal peer-to-peer lending sites – used to borrow money to individuals for purposes other than business.
Social peer-to-peer lending sites – borrowing money to worthy causes and businesses working in impoverished areas.
Business peer-to-peer lending sites – loaning money to businesses.
Student peer-to-peer lending sites – loaning money to students or people looking to pay off their student loans.
Why is Peer-to-Peer Lending a Good Way to Make Money Online?
There are several reasons why shrewd businesspeople should consider peer-to-peer lending a good deal:
You decide how much and to whom you want to lend
The return rate is higher than average (close to 9% as opposed to projected 6% on the stock market)
You can diversify and lower your risks substantially
You know where your money is going – finance people and projects you think deserve it and those who are not involved in morally dubious activities.
Where to Start
After making the decision that you actually want to go into peer-to-peer lending and setting your goals, it’s time to take action.
The decision on which people or businesses you decide to invest to is entirely up to you but following these steps might help you maximize your profit:
STEP 1 – Decide on types of loans you want to finance.
STEP 2 – Select one (or more) online platforms, open an account and fund it.
STEP 3 – Decide on the risk level you’re comfortable with – higher risk means better return but there is no guarantee you will get your money back.
STEP 4 – Diversify your portfolio – make sure you have a healthy balance of high-risk and low-risk loans that you’re investing in.
STEP 5 – Cherry pick your investments – look at past loans by borrowers, credit score, and line of work (students, lawyers, and doctors tend not to default, while, surprisingly, real estate agents and low-income employees are a riskier investment).
STEP 6 – Invest larger sums for more profit – if you’re doing your homework and taking time to pick your investments, you will get a higher return if you invest more money. Investing $25 means that you need to find hundreds of good individuals to invest a more substantial amount of money, and sometimes there aren’t so many good loans.
STEP 7 – Stick to your investment strategy – don’t invest just for the sake of it. If there aren’t any good loans to invest in, consider something else until an opportunity arises.
STEP 8 – Understand the risks and be prepared.
1. Learn About Peer-to-Peer Lending
2. Personal Lending Sites
3. Social Lending Sites
4. Business Lending Sites
5. Student Lending Sites
Have some cash laying around? You have to options - put it in a savings account or help out someone and make money at the same time.
Your loan can mean a world of difference in someone's life but it can also generate more income for you - if you play your cards right!