Your bills are paid and you are putting money into savings each month? Congratulations! You are doing better than most people!
But now is the time for the next step. At the moment, your money is just sitting in the bank, and you are probably losing it due to inflation. There must be a better way, right?
Peer-to-peer (P2P) lending is an excellent low risk, high reward opportunity for you to dip your toes into investing. Make your money work for you!
What is P2P lending?
Peer-to-peer lending is a practice of lending money through online platforms that match lenders and borrowers which is disrupting the finance industry at the moment.
So, for example, if you want to borrow money, you can go on a P2P lending platform, and find someone willing to lend you the amount of money you need. No need to go to the bank!
Then, you repay the loan following an agreed schedule, and the person who lent you the money gets interest payments every month, providing them with passive income. It’s a mutually beneficial arrangement.
Because P2P platforms function online, they don’t have many overhead costs, and therefore can make their services cheaper and more accessible than traditional lending institutions such as banks, providing their investors with an average return of 8% - 13%.
This makes P2P lending an appealing and lucrative investment option for those who are looking for low-risk high-reward investments.
Five ways P2P lending is disrupting the game
For a long time, consumer loans were an investment vehicle only available to the banks, that were making tons of money from it.
However, now more and more people forego banks and use online P2P platforms instead. Why is P2P lending so disruptive?
Here are the five main reasons why P2P lending is so disruptive:
#1 It gives ordinary people an opportunity to invest in lucrative assets
When people get interested in investing and start researching the various options available to them, they often get disillusioned with the fact that some of the most lucrative investments are not available to the ordinary folks.
Consumer loans are a great example of an asset like that. Banks make tons of money through giving out loans and charging high-interest fees. However, up until recently, it was not possible for ordinary people to invest in these loans.
Things are different now, though. With P2P lending, everyone can invest in consumer loans, and get their piece of the pie. And people are taking advantage of this opportunity - millennials who are looking for ways to make more money, families that want to get a higher return on their savings, senior citizens who want to boost their pensions, you name it. P2P lending is on the rise!
#2 It’s easy to start even if you are a newbie or don’t have much capital
Another thing that often deters people from investing is how difficult it is. Investing in stocks or real estate can be really complicated. Even reading a dummies book can make your head spin!
Moreover, there’s also the fact that to begin investing, you often need a significant amount of starting capital. For example, if you want to start investing in real estate, you need a downpayment of tens of thousands of dollars. There aren’t that many people who have that amount of money lying around, which means that for most, investing often remains out of reach.
Luckily, when it comes to P2P loans, everything is much simpler and much more accessible. For example, with FastInvest, filling out the application to become an investor takes no more than an hour, after that you are ready to go. Then, if you don’t feel knowledgeable enough to make decisions yourself, you can use our AutoInvest tool, which will do all the hard work for you. Finally, you don’t need thousands upon thousands of dollars to start - you can begin investing with as little as $1!
#3 P2P lending offers a high return on investment compared with other options
Investing can sometimes be scary. It’s no wonder that it’s so tempting to just stash your money in a savings account and forget all about it. However, are savings accounts worth it? We don’t think so.
The fact is that most savings accounts will give you only 1%-2% return on your investment. For example, even best-paying accounts, such as fixed-rate ISAs, would only net you 1.35% ROI. Meanwhile, inflation is usually around 2%-3%, which means that you would actually be losing money!
Stock market returns aren’t that great either. The average return for investing in stocks is 7%. But you also have to keep in mind that stock market is volatile. A crash, like the one that happened in 2008, can wipe out your entire portfolio. Then what?
Compare these options with P2P investing. For example, FastInvest offers an up to 15% return on your investment. Moreover, you can take your money out at any time, and we even offer a Default guarantee in case a borrower defaults on the loan. Low risk, high return. It doesn’t get any better than that, does it?
#4 It’s a great way to build a stream of passive income to supplement your regular income
Is your salary your only source of income? If so, you are in a very precarious situation, even if everything looks alright now. As hundreds of thousands of people all over the world learned during 2008 financial crisis, jobs aren’t as stable and reliable as they used to be, and can evaporate when a crisis hits.
Then, even if your job doesn’t just disappear, there’s always a possibility of you becoming ill or injured, which would prevent you from working and bringing home the bacon. That might be an absolute disaster unless you have streams of passive income you can rely on until you get back on your feet.
And then, there’s the retirement issue. Are you sure that your pension is going to be enough to fund your retirement? As we noted in our Retire Happy: How to Pump Your Pension Pot With P2P Lending article, when it comes to retirement, money is everything. You don’t want to be destitute when you are old, do you? That’s why it’s important to act now to create supplementary streams of income.
P2P lending offers a great opportunity to build a stream of passive income. For example, with Fast Invest, we guarantee a return of up to 15%, and you’d get this return every month. You can also decide whether you want to withdraw your money or reinvest it and let it compound.
#5 It allows you to help those that are in need of a loan.
There are plenty of honest, hardworking people who can’t get loans through the banking system because they have a bad credit or simply haven’t had the chance to build up good credit. Also, banks usually aren’t eager to loan out relatively small amounts of money (less than $5000), because loans that size simply aren’t that profitable for them. That means that a lot of people whose lives could be changed by a relatively small loan don’t have the opportunity to get one.
And then there are the so-called unbanked of the world that make up 39% of the world’s population. Are you aware that there still are 2 billion unbanked (and underbanked) people out there? These people often live in deep poverty and don’t have the resources to pull themselves up out of it. Getting even a small loan (some loans given to the poor are as small as $25) can change their lives because it allows them to start a business. This is why cryptocurrencies are becoming more and more important in P2P lending. P2P lending platforms that are built on blockchain can bring new opportunities to the world’s unbanked.
We live in uncertain times.
The era of a company man that worked in the same company for his entire life is over. We can’t count on our employers to provide us with a life-long employment anymore. Often, even employers with the best intentions have to downsize and let people go, sometimes through no fault of their own but because of the fluctuations in the economy.
Moreover, in many countries, retirement isn’t guaranteed either. Sure, the government says that it will be fine, but with ever-declining populations in Europe and North America, it’s unclear if there will be enough working adults to support the elderly. Who’s going to pay for your retirement? You can’t afford to rely on the government or on the future generations for this.
All that means that you have to really take control of your finances and your future. It’s not enough to live within your means anymore. You have to save money and you have to invest money. Only then you can create a solid future for yourself and your family.
So why not start today with P2P lending?