You may be curious about P2P lending but are not sure what it is all about. In this short post I will give you a basic idea about what P2P lending is.
P2P lending is when one person lends to another in return for interest, without a third party getting involved. Did you know when a someone goes in to a bank in order to get a loan, the bank is using funds deposited by other people to make those loans? So, the bank is using our money to make a loan to others and is keeping most of the interest generated from that loan. Does that seem fair?
With P2P lending, you are the one making the loan to the other party and YOU are the one who is going to keep the majority of the profits. Of course you are also assuming the risk that the other party may not pay you back. In 2020 P2P lending is done through an online platform and that platform will keep a small percentage. Right now Constant is my favorite P2P lending platform.
There are several different options when it comes to P2P lending platforms so you have to chose what is best for you. When I search for a P2P lending platform I look at how safe will my investment be. I have had poor results from platforms such as Prosper so now I look for a platform that either has a buy back guarantee or one that can collateralize my loan.
One key element to remember when doing P2P lending is to diversify. It might seem like a great idea to stash your cash into that one seemingly great opportunity with a super high rating and an excellent return. Always remember that if you sink all your funds into that one P2P loan and they default you will lose your money unless the loan is collateralized or has a guarantee.
Do you think P2P lending might be right for you? Do you participate in P2P lending? What is your favorite platform? Leave a comment below and let me know.