Changing the World through Peer-to- Peer Lending

Posted by Oliver Ilves on in Personal Finance
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Changing the World through Peer-to- Peer Lending

As an investor, if you have cash that you wish to invest you have a number of options, including savings accounts, bonds or riskier investments like stock markets or complicated derivatives.

Savings are safe but offer paltry returns, bonds pay out regularly, but cannot grow your money, and shares require a great understanding of the markets.

Technology has been embraced and utilised as a natural progression for forward-thinking enterprises and individuals, and we now have the platforms in place that can connect borrowers and investors from all over the globe with each other.

There are now a growing number of P2P lenders to choose from but what are the advantages or disadvantages of such investments?

Advantages of Peer-to-Peer Lending

  • The most obvious advantage is that you may receive far greater returns than traditional financial institutes can offer.
  • Lenders and borrowers are likely to pay lower fees than they would with another broker or financial institution. P2P organisations realise that they are in direct competition with banks and credit unions, so know the importance of providing value-for-money.
  • Borrowers are more likely to be successful in raising finance, because a larger lump sum of investment is easily broken down into smaller, more affordable, and therefore, less risky sums for a number of lenders or investors.

Disadvantages

  • The biggest downside is that the risks involved will be far greater for investors and lenders due to the nature of the startups and projects seeking funding. These could be seed stage startups with little or no experience. Hence why traditional financial institutes won’t engage with them.
  • The human element involved can be abused by manipulative con artists, so due diligence is vital for users, as it is with any other investment.
  • The lack of legislation around some regions.

How to avoid disadvantages and reduce risks?

P2P investing in property or also known as real estate crowdfunding is a relatively new and interesting concept to take a look at. In fact, it’s safer than standard P2P investments because in most cases such investments are protected by a mortgage.

Established online investing platforms such as Bulkestate have plenty of information on the investing process to get you started and to guide you through making a property investment. Another important aspect is due diligence. As most investors are just seeking for investment opportunities but lack the knowledge about the market, Bulkestate team does the pre-vetting process of properties before publishing them to the platform.

Points to note:

  • There is far more security involved because the investment is secured by the property, making this type of investment a lot safer for investors.
  • You are also sharing the risk with other investors, making real estate investing more affordable and accessible as an investment option.
  • The correct property market can be extremely strong, making attractive returns on investments a likely scenario.

The Future

There are clearly many positive aspects to P2P lending, and there are a large number of sites catering to the different areas of interest, be it loans, business funding or real estate investments.

For a small affordable amount, you can sign up to a P2P platform by filling in an online application. Then you simply transfer the amount of funds you wish to lend or invest and start searching for suitable projects to get involved with.

Tagged in: personal finance
Passionate about alternative investment opportunities in the online space. An active investor on multiple real-estate crowdfunding platforms.

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Guest Sunday, 17 December 2017