Beginner’s Guide to Peer-to-Peer Lending
If you’re disappointed with the interest you’re getting on your savings then you may want to consider getting involved in peer-to-peer lending. It’s easy to get started, and can see promising returns, as well as often helping businesses and individuals in your local community. Here’s how it works:
Registration
Usually a very quick process – you’ll need to create an online account with your chosen lender, using some basic information, after which you can transfer some money to your account and be lending almost straightaway.
Accessing Money
In most cases, if you want to withdraw money from your account there should be no charge, but if the funds have already been lent, cancelling your contracts will mean an administrative reshuffle for which you can expect to pay a small charge. It’s worthwhile to check the terms and conditions of individual lenders.
Managing Risk
No investment can be completely safe, but for some years P2P lenders have enjoyed handsome returns for their money. It’s wise to do your research and select a reputable platform that takes a sensible approach to managing risk. Some will even have insurance policies designed to cover the cost if large numbers of borrowers default.
Loan Distribution
The role of the peer-to-peer platform is to assess risk and distribute funds from thousands of similar investors. You will have no contact with borrowers, but may be given some say in how your money is lent. Of course using a specialist platform, such as one that helps real-estate projects get off the ground, helps if you want to lend to a specific sector. Your money will be split into small chunks so if one loan goes bad, dozens of others will pick up the shortfall.
Repayments
As with many other forms of investment, you will have the opportunity to either take your profit directly into your account, or reinvest. The maximum benefit from peer-to-peer lending tends to come from keeping your money available on the market at all times.
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