One of the best ways to make money is to invest in peer lending. Not only is it a popular investment method, but it is also very profitable. The reason for that is the increasing rate with which borrowers are picking peer lending over traditional bank loans. As an investor, you can provide the money which will be lent to others for you to earn returns in the form of interest.
What’s Peer Lending?
Also known as peer-to-peer lending, it refers to the phenomenon where borrowers are connected to lenders through an intermediate company. The borrower approaches the company, which then connects him or her with a potential lender. After going through the borrower’s profile, the investor makes the decision to lend his or her money to the borrower. As such, the lender may choose to provide all or part of the requested loan amount.
Every month when the payments are made, part of the money is sent to the lenders involved. Peer lending provides investors with opportunities to diversify their investment portfolios with the possibility of making more money.
Reasons to Invest In Peer Lending
Just why should you invest in peer lending? By availing your money for lending to other individuals, you put yourself in the vantage position to make more money. Here are two reasons for that:
1. Offers Better Returns Compared To Bank Rates
Bank rates have always been very low. Because of that, it does not make sense for you to have a lot of money sitting idle in a bank account. Owing to the low interest paid on savings, you may end up losing your money as a result of high inflation rates. With time, the cost of living will change, thus rendering your money virtually useless.
In short, keeping money in a savings account is only good if you are doing it in the short-term. If you need long-term returns, then you need to invest in peer lending. Peer-to-peer lending companies usually use compound interest when calculating how much money you should get in terms of returns.
2. Compares Favourably With Company Bonds
One of the reasons to avoid bonds is that they are unsecured. Also, investing in bonds is putting money directly into company stocks. Due to the fact that companies do fail, this is a very risky venture. It gets worse when the company gets into financial headwinds. During that time, bond investors are at the risk of losing all their investment. At the same time, the rates paid on bonds aren’t that attractive.
The alternative is to invest in peer lending. Don’t choose just any company. It is good to work with a firm with proper regulation. With time, you will be able to earn a lot of money in terms of interest.
As you can see, peer-to-peer lending is one of the best ways you can diversify your investment portfolio. Whether you are already on the stock market and forex market, you need something to cushion you against unmitigated losses. Peer-to-peer lending, also, has good returns with rates of over 10 percent. Entry is easy, given that the size of loans is minute.