In the current climate, bank interest rates are just slightly above 0%. Resulting in people have been looking for ways to earn a higher return from their savings. People also always avoid the volatility of the stock market. Thus, earning money through peer to peer lending can be the solution.
Peer to peer lending is a relatively new concept. It enables a person to obtain loans directly from another person. It cuts out the financial institution as a third party. It is also commonly known as social lending or crowdlending. It also does not require complicated documents. There is no credit check, fewer fees, and potentially lower interest rates.
Meanwhile, for a lender, you lend your money directly to the borrower. The lender also can keep more of accrued interest. It is more beneficial. Keeping your money in banks means you let a large portion of the interest collected by them. So, you can earn money through peer to peer lending as the lender or borrower.
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How Much Can be earned
The amount of money you earn depends on the amount of money you invest. The type of loan you choose will also affect the amount of money that you earn. The less risky borrower qualifies lower interest rates.
Peer to peer platforms grade borrowers based on their credit history. It also grades borrowers from the type of loan and the amount they want to borrow. If you want to earn a small-but-steady income, you can choose the borrowers with a solid credit history.
Is It Safe?
Peer to peer lending can be as safe as any other investment platform. But, there is also no assurance to get significant profit every single year.
The best way to decrease the risk of investment you need to diversify your investment. You can also consider investing in dozens of different loans.
But, you still have to carefully screen the type of loan and borrower. The Screening process will help you to avoid risky loan or borrower. The peer to peer lending platform usually provides you with the average default rate of each borrower.
