Anyone who has been paying attention will have noticed an emerging market within the investment field: consumer loans. When the P2P (Peer-to-peer) phenomenon first began, somewhere around 2005, most loans were provided by banks, either in the form of a personal loan or a credit card. Homeowners had the option of a secured loan against their house or equity release, but up to that point, nothing had ‘disrupted’ the big financial institutions and their monopoly of consumer lending.
Therefore, when the first P2P platforms began to pop up, there was quite a lot of skepticism; who would lend money to someone who had been rejected by traditional banks? Wouldn’t the risk be too high? Didn’t we learn anything from past financial crises? But then others started seeing the poetry in the proposition.
Now, few years down the track, while still not mainstream, P2P loans have become more of an established part of the financial system, but there still exists some ambiguity and confusion about what they actually are, how they differ from traditional lending services, and what they can offer to potential investors. And that’s what we’re going to talk about today.
P2P Loans: Everything You Need to Know
Let’s start with the very obvious first question that everyone needs to know; what are P2P loans?
At the very basic level, they are loans fulfilled by individual members of the public to other members of the public, rather than through traditional means such as the bank. Peer-to-Peer Loans are facilitated by a lending platform, such as FastInvest, and P2P lending allows people to borrow money from other people (usually more than one per loan), rather than traditional financial establishments. The primary benefit for the borrower is that decisions are usually made based upon their credit rating, which means that evaluations can be made far more quickly – in many cases instantaneously. The primary benefit for the lender is that they can achieve a far higher rate of interest for their investment than they would through a standard savings account, with very little risk.
So, that, in short, is what the phrase ‘P2P loan' refers to. And from that, you will probably have gathered who the P2P loan might appeal to. Namely, people who either have a lower than average credit rating, no credit rating, or people who need funds quickly. For a good proportion of loan applicants, the P2P sector of lending provides a workable alternative source for much-needed funding.
So, the next question is how do P2P loans differ from other loans other than the means by which they’re gained? Well, there are a number of different factors. Firstly, most consumer loans are unsecured, which means that, as we’ve already mentioned, the application process is usually quick and far less detailed than when working with traditional banks. Why? Largely because most decisions are credit history-based, so the borrower doesn’t need to visit an office and explain their plans; the loan platform merely assesses the likelihood of the borrower defaulting. It's partly because of this that the amounts involved are usually lower too. Another varying factor, and certainly an appealing one for anyone considering applying for a P2P loan; the interest rates for the borrower are often lower than traditional bank loans too.
That’s the nutshell, then. Now we move on to the important bit:
How you can gain from the momentum this lending model is gathering, if you have spare cash to invest.
For this section, we’re going to concentrate on P2P lending, simply because this is the model that we know inside out at FastInvest, but if P2P doesn’t appeal there are other options, including ICO (Initial Coin Offering) investment into facilitator platforms – which we’ll also cover shortly.
The real beauty of P2P lending through FastInvest, is that anyone can do it. Literally, anyone. With investments beginning at a single euro, it’s possible for anyone to make money with their spare change.
For the sake of impartiality, it’s important to state that we’re not the only P2P facilitator platform available, so feel free to shop around before you start, but when you do start, the process will be broadly similar whoever you work with. It’s just the interest rates and guarantees that will change.
What are the options available to Investors? How does the model work?
It couldn’t be easier to get started, so simple that it can be broken down into just three simple steps:
- Select your facilitator and browse their current loans list. See something you like the look of? Move on to step two.
- Register with the platform and transfer the funds you wish to invest into your account – with FastInvest, this can be as little as €1, as much as €100,000, or anywhere in between; the choice is yours.
- Confirm and commit to your investment choices, and wait for your interest to roll in.
At FastInvest we also provide an ‘Auto Invest’ tool, so if you don’t have the time or inclination to continue to search for new investment opportunities, we can work to your specified criteria and automatically invest your interest or deposited funds in new opportunities as they arise. This ensures that your money continues to make money, even when you don’t have time to help it along. Most P2P loans have terms of between one month and one year, so your money isn’t tied up in long-term red tape, and with our guaranteed buy back promise, should the need arise, you can access your cash whenever you need it – not something you’ll find in the vast majority of traditional savings and investment frameworks. Likewise, our default guarantee protects our investors against any missed payments.
Of course, the cherry on top of all of this easy investment is that your interest rate will be up to 10% higher than you would experience with established methods. While the Bank of England’s interest base rate is now 0.5%, and a standard ISA will offer up to 2%, FastInvest delivers 9-13% interest, which can help your little pot of gold swell exponentially.
How to become a part of the P2P movement and invest in the FastInvest platform
At the heart of P2P lending is the facilitator, which naturally means another investment opportunity. P2P is a growing market, expected to exceed a value of US$1trillion by 2025. If you haven’t invested already, now is the time to do so.
FastInvest will soon invite potential investors to become partners in the platform via the purchase of company tokens through crypto currency. To become a full crypto community member, you must first purchase 800+ FastInvest tokens.
For a limited period – January 4th, 2018 10:00am London time until February 4th, 2018, 3:00 pm – FastInvest Tokens (FIT) will be released via the public Ethereum blockchain as an ERC20 token. 666 000 000 tokens will be generated, and smart contracts will be created by the openZeppelin framework.
Using this method, 50% of tokens will be generated to Crowdsale participants. The funds raised will be used to further enhance the FastInvest infrastructure; opening new offices – including the first in America – and launching new products, such as the FastInvest app and payment card.
For investors, this doesn’t just present an opportunity for an unusual crypto-investment – most ICOs relate to the launch of a business, whereas FastInvest is very much a going concern, having been profitably operating since 2015, and therefore presenting far less of a risk – but in becoming a member of the FastInvest crypto community, they will gain exclusive access to the full range of FastInvest products. This means that they will be the first to be issued with a FastInvest crypto payment card, which will allow them to spend their virtual currency – of all denominations – in the real world, as well as online.
And for those who like a bargain, there will be a limited 38 850 000 FIT with 20% discount. ICO launch on December 4th, 2017 – watch the website for details.
With the likes of Forbes currently recommending P2P as a sound investment opportunity, thanks to its low risk vs high return ratio and low correlation with the stock market, there’s little doubt that now is the time to get on board with this innovative investment model. Following the Bank of England’s November 2nd announcement that UK interest rates would be rising for the first time in a decade, there is a slightly inflated sense of optimism amongst British savers, but while the announcement could be considered good news, 0.5% interest is still nothing, when compared to the potential 13% that FastInvest could offer.