Investing money is an activity we are encouraged to involve in because of the way it can help you grow your money. As opposed to savings that would generally keep your money redundant since the interest is often minimal, the right investment could help you double your money in the same time that you would have just gotten a 10 per cent interest on it if it was kept in a savings account. There are many ways to invest money and one of such ways is peer 2 peer lending. This article will provide general information about peer 2 peer lending and discuss how you can reduce the risk of investing money through peer 2 peer lending.
General information about peer 2 peer lending
Peer 2 peer lending is a type of investment where you give out your money as a loan to another person who needs money for some time. Once the time elapses or before the time elapses, the person who loaned the money is expected to pay back the money with interest. One of the major businesses banks carries out with people’s fixed deposit lending it to other people. They collect higher interest rates and pay the person a part of the interest as the interest on their savings. The major problem is that percentage most financial institutions return is often very low, mostly lower than half of the profit they made from your money. Peer 2 peer lending provides a platform where both parties can benefit. As opposed to putting your money in the bank where the bank gives it out to someone else at 21 per cent interest and then pays you 8 per cent interest for the same period, peer 2 peer lending platforms will allow the borrower to borrow the money at 18 per cent interest rate and then pay you between 13 per cent to 16 per cent interest rate, while the platform keeps the 2 to 5 per cent. This makes lending more profitable for both the person borrowing the money and the lender. Thus, more people are beginning to use peer 2 peer platforms since it is more profitable for them irrespective of if they are investing in the company or borrowing from the company.
How to reduce the risk of peer 2 peer lending
If you are investing in a peer 2 peer platform, it is important to choose the right platform. Many things could go wrong. Prominent among such things is the fact that the company could be a fake. If it is a fake, they could suddenly disappear with your money just before it is time to get it back. The second is the fact that they might not carry out a background check or collect adequate information from the person who wants to borrow the money. The person could get the money, refuse to pay back and your money could be lost. Hence, it is important to read about p2p lending to know about the companies that other people have used and found reliable. You should also check through the website of the company to be sure that their terms have not changed from what you are seeing in the reviews as they would only relate to you based on the terms on their website and not what you found somewhere else that was probably not said by a representative or said a long time ago after which a lot of things have changed.