The question really is are you ready to lend money to somebody that you don’t even know? Gosh, you may find it hard to lend money to close family and friends, so why in the world would you lend to strangers?
The answer is because this is another form of investment. The whole purpose of your investments should be to put you in a very successful financial position for the future.
Having said that, investment is one thing but being a fool with your money is another. Let’s get past that way of thinking and really look at peer to peer investing for its potential value.
Basically you would be investing in a borrower’s note that they committed to in return for a certain amount of money. These are borrowers who have not used the standard methods of borrowing money through lending institutions like the Banks. You as the investor will not know the borrower.
Don’t worry this is not something you are going to be doing on your own. There are companies that are totally dedicated to peer to peer lending. Your biggest challenge is choosing a reputable company that is experienced with this type of lending and specializes in it.
These Companies that are going to invest your money for you will have done their own background checks on the borrowers and will not take unnecessary risks with your money. If they adopted that type of practice then they themselves would not be in business for very long.
What you should expect from a Peer to Peer Investment Company is….
You may be thinking this is high risk investing because the borrowers are not using the standard lending institutions. Just think back to the last time that you went to the Bank to try and borrow money. It was probably such a big hassle that it was one of the driving factors to encourage you to become more financially secure. Perhaps it contributed to where you are today meaning that you have money to invest.
It is not just one person that you will be loaning your money to. You actually select an amount that you want to invest and give this to the Peer to Peer Investment Company. Let’s say you want to invest $1,000. So that $1,000 is now added to the lending pots for many different borrowers.
So your investment in one borrower may only be $50. That means you also have several other borrowers that are relying on your $1,000. Your risks of totally losing your $1,000. Investment is extremely minimal.
Always keep in mind that a good investment portfolio has to be diversified. This reduces your risk. Don’t assume that your return on investment with peer to peer investing is so low that it's not worth the time or any risk at all. Your parents may have told you that if you look after your pennies then the dollars will look after themselves. I like real estate investments that pays monthly income. Those are the best investments as long as the risk is low!
Investment is all about accumulating more money made from your money. Over time this adds up, and time is what should be the priority when building your wealth. If you really want those retirement years to be your golden years then a diversified portfolio which includes peer to peer investment is what is going to get your there. Having said that you want to keep this type of investment to a low involvement. I personally don’t use anymore than 5% of my investment money for this of investment.