An increasing number of people are starting to investing in peer to peer lending platform and offers a few loans to make some profits. P2P lending is easy because you don’t need to have a large capital to become a lender. Many platforms will allow you to become an investor by investing as little as $20 and there is also no limit on the maximum amount of investment you can make. Whenever someone wants to borrow a loan from the p2p marketplace, they will post a listing. You can go through the listings in the marketplace and bid on the one that you are interested in lending money.
There is no need to lend the entire amount and you can just lend a part of the requested loan amount. You also get to decide the interest rate and fees on your own. The interest rates and fees are how you can generate profits from the loans you lend. Lending money through P2P platform can gives you a regular side income. The monthly payment that the borrowers make will be transferred to your bank account. Some platforms give you the option of liquidating the funds prior to the end of the loan term.
One benefit of P2P lending is that it allows you to diversify your risk so that you won’t lose all the money you invested when only a few of them did not make repayment on time. You get to decide who to lend the money and bid on the listing you are interested. The loan listing will provide all the financial information on the borrower so you can make a good decision including filed accounts, credit score, and income. You can contact the borrower and ask him any question you have about his finance. It is up to you to lend to those who provide security for the loan.
P2P lending also has its own downside and one of the downsides is that the investment you make is not protected by the Financial Services Compensation Scheme (FSCS). It is important that you choose a platform that is clear about the risks involved for individual lenders. The P2P lender should have a proper procedure in case something happen to your investment.
The interest that you earn will be a tax in your annual income tax. After you submit an application at the P2P platform, you have to wait for some time to get approved. During this period, you won’t be earning any interest on the investment. Becoming a lender on a P2P platform allows you to help small businesses in the local economy. Nowadays, it is hard to borrow a loan from a bank and you can help by contributing loans for small businesses that need some capital.