How to Get Started With P2P Lending

Mihai-Alexandru Cristea 20/09/2022 | 21:02

The concept of passive income is becoming increasingly popular, particularly over the last couple of years. This is usually achieved through investments, where little physical work is required, at least in the long term. There are plenty of ways you can invest your money to make a profit, one of them being peer-to-peer lending, which allows you to lend someone money and have them pay it back with interest. 

 

This article will advise you on how to get started with P2P lending if this is a form of passive income that you are considering for yourself. 

Decide How Much Money You Are Willing to Lend and Interest Rates

One of the very first things you will need to think about as a lender is how much money you are willing to lend. Just like with every other investment, there are risks to P2P lending and you must take these into consideration to avoid being at a loss completely. The profit from P2P lending comes mostly from the interest rates that are set as part of the repayment installments from the lenders. So be wise when choosing the percentage you will charge. The higher this is the more money you make from each installment but it may also mean that fewer people or businesses will agree to borrow money from you. 

Choose a Platform

P2P lending is achieved online on several platforms so you do not have to worry about doing all the leg work. However, to make things as smooth as possible, you must find a platform that you can rely on and that suits your needs. Certain variables to look at when deciding on a platform to use include the experience of the founders of the platform, history and track record, transparency, and whether it is easy to use. 

You also want to make sure that it undertakes appropriate checks not just on the lenders but also on the people borrowing money so that there is less likelihood of you losing capital. 

Open a Lender Account

Once you have chosen a platform you will have to create your own account. This is one of the easier steps of the process. You will need to add your personal details as well as financial. You will need to set the interest rates that you will charge, as discussed previously. Once you have undergone the registration process and have been verified by your chosen platform, you will start to receive requests and applications from borrowers in need of money. You can accept or reject these as you would like. 

Become an Expert on The Subject

The word expert may be a bit much but you get the point! You may not have to know every single thing there is to know about peer-to-peer lending but you should certainly understand the basics if you want to get involved in this. It may seem like an easy process and easy way to make passive income, but this does not mean that the risks are not still present. The less you know about an investment, the more likely you are to suffer serious losses. 

In this day and age, obtaining information is easy and a simple click away. You can read books, watch videos or listen to podcasts to ensure that you learn as much as possible. 

Learn From a Mentor 

Another great way to learn how to get started with P2P lending and how it all really works is by learning from someone with actual experience. Learning on your own is possible but it can make the process much longer and you may have to make a few mistakes before knowing what you are doing. Surely, you will want to avoid this at all costs. If it is a possibility and if you are willing, why not ask someone for help? 

There are people who work solely with the purpose to mentor others in a variety of aspects of life – investment being one of them. Make sure to find someone with this particular expertise and your journey into P2P lending will be much easier. 

Consider The Risks

You may want to get involved in P2P lending due to the passive income it can bring. However, you must remember that every investment carries certain risks. You should be aware of these even for simple investments such as peer-to-peer lending. You may note that commonly the people who borrow money in this may have been rejected by banks and may not have any other loan options. This may make them high risk when it comes to paying you back so be aware of this. 

Moreover, you should really only invest money that you have to spare, rather than making this a priority to safeguard yourself. This way if you lose your money, it will not be a big loss to you and you may not be as impacted by it but rather use it as a lesson going forward. 

If you are thinking about getting started with P2P lending, it is a good thing that you are trying to learn more about the subject. Make sure to follow the tips discussed on this page to ensure you get involved in this positively to increase your chances of success. 

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