Peer to peer lending is one form of investment that’s worth looking at if you’re looking to diversify your portfolio. But one of the challenging aspects of this investment is choosing what lending platform is the right one to go with. There are plenty of elements that factor into this, so here are a few tips to help find the right P2P lending platform for you and your money.
Do Your Research
The first thing that you want to look at is doing some research on each lending platform that’s out there. A good place to start is looking at the statistics that the platform has. This might be the number of investors that are currently investing in their platform and how long the company itself has been actively functioning as a lending platform.
The proof can often be in the statistics, and the numbers don’t often lie. You might also want to look at the number of loans or products that have been funded by investors. A lending platform might have a great number of investors signed up but if only a small percentage are investing, is that because there’s not enough on the platform? Or is it perhaps to do with the quality of these loans?
Look At Reputation
There are a lot of benefits that come from the reputation for any business. And it’s something that you can’t often run away from, especially thanks to the internet and social media. So take a look at their current reputation on the market of peer to peer lending. Are they being talked about on social media or in newspapers positively?
Are bloggers or websites in general, giving this lending platform a spotlight? Perhaps they’re not being mentioned at all, and that in itself might be a sign. You can read reviews about P2P lending sites on p2pempire.com to get a feel of what’s out there but to also read up on those who have used the platforms before and how they found it.
This can always be good for those who are first-time investors or new to P2P lending. You’re testing the waters before having to part with your money, and it’s a smart thing that’s worth doing.
What Are The Platform’s Features?
Each platform works a little differently, and so you want to figure out which one works best for your needs and wants. The benefits of P2P lending is its transparency, and therefore you can see through financial reports, whether the platform is making money or not. It’s also worth looking at what features the platform has and comparing them to others that you’re looking at. Features like auto-investing, where you don’t need to do anything except watch as your money gets automatically invested. You can have control of the diversification options available and what type of loans you invest in.
It all depends on how much money you’re looking to invest and how little or more control you want over your investment portfolio. You might want to use more than one platform or to stick with one that really does everything you’re after. It’s important not to rush into signing up for a platform that doesn’t end up being something you thought it was.
Risks And Securities
There are many risks to investment, and that’s something worth reminding yourself as you do your research into P2P lending. You should only ever invest what you can afford to lose and all the loans you lend to, carry their own individual risks.
So with that in mind, it’s important to compare the risks with the benefits. What risks are there?
Do you get full involvement in how your money is being spent, and what security does that platform provide?
Some will provide buyback guarantees, which promise to pay the lender back if the borrower delays payment by 60 days.
The buyback guarantee is often provided by the loan originators that list their loans on various P2P platforms. Investors often don’t have all the relevant information about the loan companies, which makes it hard to evaluate the quality of those “buyback” options.
Note, that a buyback guarantee might come with a lower yield on your money as the loan originators reserves some of the interest to pay for defaulted loans. Investors often don’t realize this fact when choosing their P2P lending site.
Collateral as a Security
Some of the platforms provide investors the opportunity to invest in real estate projects or businesses. Those types of loans are usually secured by a mortgage or other type of collateral. While this type of security is more legitimate than a buyback guarantee, investors should also evaluate those investments and do their due diligence before investing their money.
How much do you earn from each loan investment? There are a lot of things to factor into, some will be risk-taking, and others will be benefits that you get from those risks. It’s all about how much you want to risk for the chance of being rewarded much greater profits from your investments.
Note, that investing in P2P loans is not risk-free. There is plenty of P2P lending sites, that aren’t legitimate. As a result of this, investors had already lost a significant amount of money.
To stay away from those platforms, investors should educate themselves about each platform’s risks and securities.
It’s good practice to reach out to the platform and ask a few questions. This will give you an idea of how the P2P lending site, treats its users. At the end of the day, the platform is managing your hard-earned money. If the support isn’t able to answer all your requests, it’s a sign that you shouldn’t invest in this platform.
Finding the right P2P lending platform for you as an investor will take some research and be sure you do it before spending your money. You wouldn’t want to go wasting your money on something that wasn’t beneficial for you, so follow these tips to find the right fit.