In this post we will be taking a look at how peer to peer lending works. We will cover what it is and the advantages and disadvantages for both lenders and borrowers and whether it is right for you.
Peer to peer lending, sometimes known as P2P lending, is the act of lending money to borrowers through an online finance platform. Peer to peer lending platforms such as Lenme directly connect borrowers and lenders.
This is a relatively simple arrangement that has benefits for all parties. The lender gets a good rate of return on their investment by receiving back their lent capital plus interest payments. The borrower gets easy access to a flexible loan with low interest rates. The lending platform earns money by taking a small fee or percentage of the loan as profit.
Advantages And Disadvantages To Peer-To-Peer Lending
Like all types of investment there are some advantages and disadvantages. Whilst we are looking at this more from a lenders perspective as a form of investment we will also look at the pros and cons of being a borrower.
Investing Money Using Peer To Peer
- Good rates of return, especially when compared to cash savings
- Diversification of your investments
- Help individuals and small businesses grow by giving access to capital
- Most platforms offer some degree of protection of your funds against loan defaults
- Flexible options for accessing your money quickly
- Risk of losing some or all of your capital if borrowers default on loans
- You may need to lock up your money for longer periods to benefit from higher interest rates
- There may not be enough loans to match your funds to
As you can see there are some great advantages to using peer to peer lending but also a couple of disadvantages so you will have to be sure it is right for you. If you are looking to diversify your investment portfolio or want a better return on your savings then you should consider peer to peer lending.
Whether you are a new or experienced investor, Lenme make it easy to invest in loans and lend on your terms. They use machine learning to identify the likelihood of borrowers defaulting and guide you toward the most suitable and profitable loans. For those more experienced investors that prefer to make their own analysis, all the data is provided for you. This includes the borrower’s credit reports, income and payment history. So you can make an informed choice.
With an easy sign up process and no minimum investment, Lenme is a great place to begin investing in peer to peer lending. Check out Lenme
Borrowing Money Using Peer To Peer
Peer to peer lending offers a good alternative investment for people looking to grow their money. But the other good thing with these platforms is that they also offer many benefits to people looking to borrow money.
- Often lower interest rates when compared to traditional lenders like banks
- Convenient option for both individuals and businesses
- Easy online application process
- Only deal directly with the P2P platform, not individuals
- More flexible options compared to traditional loans. They are usually unsecured meaning you don’t have to provide collateral such as property against the loan.
- You will need to pass credit checks
- There may be platform fees for arranging the loan.
Generally peer to peer platforms are good for both individuals and small businesses. It can offer more flexibility and lower interest payments than traditional bank loans. Although as with any type of credit, you would need to be creditworthy and be able to pass credit checks. If you don’t have the best credit history then consider trying to improve your credit score before applying for any credit.
But there is an alternative if you have a poor credit score and still want to borrow money, a platform called Lenme. In addition to investing on the platform, they allow anybody to request a loan, no matter your credit record. But like always, the better your credit record, the better the terms of the loan so you should still try to improve your credit records.
So if you are looking to borrow money and want a loan with your own payback terms try Lenme.
Alternative Investments & Diversifying Your Portfolio
Peer to peer lending is a good addition to your investment portfolio. If it is not right for you or you are looking to diversify more then there are a number of other options to choose from.
Cryptocurrency such as Bitcoin is a popular alternative investment asset. You can read our blog post for more information on how Bitcoin works; Bitcoin Cryptocurrency – What It Is
For those that don’t want the hassle of researching and making their own investment decisions could consider copy trading. More information can be found here; Best Copy Trading Platform For High Returns
Many more investment options and ways to make money online can be found on our blog. Please join our newsletter to receive the latest content straight to your inbox.