Passive income is money earned in a way that requires little ongoing effort. Some passive income streams will require a little more time and effort initially. But once set up will earn you money without any or minimal further intervention. This is the second article we have published on how to generate passive income streams. Find more methods of creating passive income in this post. >>> How to generate passive income streams
Peer-to-peer lending is an alternative investment that is pretty straightforward. Simply put you are lending out your money. You deposit your cash with an online peer-to-peer lending platform. This money is then lent out to other individuals or businesses. You then receive interest payments on the money you have loaned out.
Some platforms have a general pool of loans. So your cash will be automatically split across dozens, even hundreds of these to mitigate risks. But some platforms allow you to select your own underlying investments.
Peer-to-peer lending will usually offer much greater returns than cash savings for instance. But there are risks involved as the borrower could be unable to repay the loan. Although most platforms will have provision funds to cover for loan defaults you are not guaranteed that this will cover any losses.
This can be a good source of passive income as you accumulate interest on your cash that you have lent out. You can then continue to automatically re-invest this income into further loans. This will allow your capital to grow over time.
If you are in the UK some of the most popular platforms are Zopa and Lending Works. Most UK providers will allow you to open these as an Innovative Finance ISA. Meaning all gains are free of tax. In the US some of the most popular platforms are Peerform, Prosper and Lending Club.
Whilst keeping cash in a savings account is not going to generate you much income due to generally extremely low interest rates, we thought we should include it in this list as it is a type of passive income. You are depositing a cash lump sum and then you leave it to keep earning interest on your capital.
It is prudent to keep some easy access cash on hand for emergencies or to take advantage of investment opportunities. But it is not advisable to hold large amounts of cash in a bank savings account with current low interest rates. Not only will the return be small. But depending on the rate of inflation, your cash could actually end up losing value over time.
Create Passive Income From Your Savings
If you want your money to be working harder for you then you would be better placed investing it. Investing offers the potential for greater future rewards. Although remember your money could also be at risk.
It is important not to put all your eggs in one basket. So you don’t want to be putting your whole life savings into a single stock or a single cryptocurrency. Instead split your money between different asset types such as cryptocurrencies, gold, shares and peer-to-peer lending.
eToro is an excellent trading platform as it offers access to many different asset classes. It offers commission free trading on some assets. When you register an account you also get a free $100,000 virtual trading account. So you can practice your trading strategies first before committing your own cash. You can create an account here.
Print On Demand Online Marketplaces
You are probably familiar with online marketplaces such as Ebay or eBid. But did you know there are many other online marketplaces that offer user-created print-on-demand products?
The way they work is simple. You upload a design and apply it to a range of products such as t-shirts, mugs, stationary and other gift items. These are then sold through the online platform.
An Easy e-Commerce Passive Income Business
Very little effort is involved in this process. As you do not pay for, order, stock or distribute any of these products yourself so no capital is required. All you do is upload your designs and create your storefront. The company takes care of the rest – all the printing, producing and shipping is done by them.
This means they make some of the profit. However you will receive a commission from each sale. Meaning once you have set up your store for free, you will continue to receive a future income stream from all future sales. Without having to do any of the work. And you don’t even have to create your own designs, simply hire someone on Fiverr to do this for you.
It is possible to build a nice little side business from these sort of marketplaces. We explain this in more detail in our post here >>> How to start a profitable online business for free