Have you heard of P2P financial tools - but are not really sure what they are, and how it all works? Wouldn’t mind earning some passive income - but the idea of P2P sounds a little too complicated? Well, let us end this myth once and for all: P2P lending and P2P investing aren’t complicated. It can be really simple – with the right platform, of course. Here’s all you need to know about P2P financial platforms before you get started!
What is P2P lending and investing?
Let’s start by defining what P2P finance is. In a nutshell, P2P (or peer-to-peer) finance can be described as connecting borrowers who are looking for loans with lenders who want to invest their money in those loans. This process excludes traditional financial institutions and is often facilitated by P2P lending sites.
For the purpose of this article, let’s clarify the following terms:
- P2P lending (P2PL) refers to the process of financing (i.e. of the received loan application) which allows individuals to lend and borrow money without using a traditional financial institution (i.e., banks).
- P2P investing (P2PI), on the other hand, can be defined as the process of investing your money to those who are requesting a loan.
Because it is a direct exchange between the lender and the borrower, the process doesn't require the involvement of banks and financial institutions. The P2P platform acts as an intermediary. It facilitates the process of lending and ensures controls protecting both parties are in place. They work to make the experience of lending and borrowing as smooth as possible, as well as determine their clients’ credit rating.
P2P finance is a form of alternative finance – which we’ll explain next.
What is alternative finance?
In the past, businesses and individuals who needed loans or wanted to invest their money had to deal with banks and other traditional financial institutions to carry out these financial tasks. The process was slow, tedious, and somewhat draining.
But that’s no longer the case – or, at least, users now have a choice. The financial services industry is transforming rapidly – and there are superior financing options available for those who want to make their money go further, without the complexities that a traditional financial institution would involve.
How can alternative finance platforms be defined? We think this definition from Investopedia captures it most accurately: "a more efficient intermediary in the supply and demand of capital, leveraging technology to operate online."
Alternative finance includes the likes of crowdfunding, alternative lending, and other financing models. It uses major tech and electronic communication advances to create a more efficient and accessible way of investing for businesses, individual lenders and borrowers – particularly those who may not have substantial sums to start with (Fast Invest is an excellent example of that).
How does P2P investing work?
The process of P2P investing is relatively simple. Once you’ve found a P2P lending platform you want to invest with, you sign up to become a loan lender - and decide how much money you wish to lend and for how long. You then add funds to your account and start investing in P2P loans. Many P2P companies tie up your funds for an agreed term. Make sure you are comfortable with not seeing your money for a couple of years before committing to such timescales.
With alternative financing companies like Fast Invest, however, a BuyBack guarantee allows you to stop investing any time. So, if your circumstances change, the investment will be bought from you in one day.
Now, you’re probably thinking, “How do P2P companies make sure that I lend my money to people who will pay back?”
With P2P platforms, the borrowers will apply for a loan and go through a verification process. Once their loan request is approved, they will receive a loan for the agreed period of time – and will be required to make regular repayments of the borrowed amount, as well as interest, each month.
When it comes to alternative financing, the loan verification process is first completed by licensed lending partners who supply loans to the alternative financing platforms.
That’s followed by another thorough check performed by the platform itself, to ensure the risk is fully evaluated – and the borrower will keep up with their payments.
How can I find the right company to invest in loans with?
Now that you know about P2P lending and investing, as well as the broader concept of alternative investing, you may wonder how to find the best company to invest with.
You’ll probably agree that finding a reputable and trustworthy investment platform is on top of the priority list. While there are plenty of online investment sites out there, do your research before you commit to any of them.
The ideal company to invest money with should:
- Offer a high return on investment (ROI), obviously! You’re investing in P2P loans to make money after all. ROI varies with different companies, but look for something not lower than 10-12% (Fast Invest offer up to 16%!);
- Make the process smooth, easy and quick with a user-friendly platform and an efficient financing system;
- Protect your money with a BuyBack guarantee (unexpected things happen, and your money should be accessible to you if they do!);
- Offer protection from late borrower repayments with a guarantee that if the borrower is late to make a payment, it’ll be covered by the company (e.g., a Default Guarantee).
What are the benefits of investing with Fast Invest?
Now, funnily enough – Fast Invest ticks many of these boxes!
Here are the benefits of Fast Invest to get excited about:
- Loan lenders receive an excellent return for lending their money: Fast Invest offers an 9% - 16% ROI;
- Fast Invest works with partners who provide loans that are already thoroughly checked and approved – meaning there are no shady borrowers.
- There is a much lower entry point, meaning that you can start reaping the benefits of online investment even if you don’t have much to start with. You can begin investing with as little as €1!
- Our BuyBack guarantee means you can stop investing any time should your circumstances change – we will buy back your investment within one day.
- We also have a Default guarantee, which means we will cover the payments should the borrower’s payment be overdue for 3 or more days. With us, your money is safe.
- We know that simplicity is key. Therefore, our platform is incredibly straightforward, smooth, and intuitive. Our users’ needs are always at the forefront of our minds.
And now – want to learn about how you can turn €10,000 into €100,000 in 5 years?