A beginner’s guide to Investing in Peer to Peer Lending

1. A beginner’s guide to Investing in Peer to Peer Lending Are you thinking about investing your money? If so, you might be wondering How to Invest Money to make the most out of it! It is necessary to allocate your asset in such a manner that you can lower the risk and potentially gain the returns! Here are some tips for investing your money in Peer-to-Peer (P2P) lending before you start investing: What is Peer to Peer Lending? Firstly, a quick backdrop for newcomers: P2P lending refers to an online credit marketplace by means of which anyone can invest money in unsecured personal loans to become a lender. For instance, let’s say Rahul from New Delhi has an extra ₹50,000 that he’d like to invest. If he wants to invest in the alternative of traditional investment options such as stocks and real estate, so he can opt for newer asset class of peer-to-peer lending.

2. In the meantime, Swati from Shimla needs an extra ₹50,000 for her home renovation project. She can’t obtain a loan from the bank due to bad credit or maybe it is rather a small loan amount, so instead, she can apply with the online lending marketplace. In India, Faircent is the leading online credit marketplace that facilitates these types of transactions. Now that you know what this is all about, here are 5 tips for people interested in Short Term Investment Plans of Peer to Peer Lending. 1.Research the field It is important to study the investment history of the Peer to Peer lending company you’re thinking to invest with. Get the details such as: The %age of loan default Borrower screening process The average returns offered to past investors The process of handling late payments Make sure to study the track record of investment history. Different lending platforms will have different procedures. Learn from both their errors and their accomplishments. 2.Start with the lower investment amount Are you just getting started with P2P lending? Then, start slow. Research is essential, but then again, their self-experience is the best guide. Initially, you can lend smaller amounts, even Rs.750 per loan. It will give you time to understand the platform and you can prevent yourself from making steep choices. Before you really understand the core working function of P2P lending, you should rather not start. 3.Know the Risk on Investment With every investment there is some amount of risk i.e. associated, higher the risk, higher are the returns and vice versa. You need to know your risk-taking appetite before you begin to invest. Think carefully, bearing in mind that in case of default, you can lose the entire investment. 4.Diversification – the best risk mitigation strategy! Diversification is the key to minimize the default risk and to protect your principal invested amount. It is easy to do if can spread your capital in all risk buckets. If your money is diversified across 100s of loans, your returns are likely to be considerably higher than the defaults. 5.Reinvestment: Peer to peer lending returns brings in the monthly cash flow. Investors have a choice either to cash out the earnings or reinvest them back to fresh loans. Reinvesting is suggested as it brings in the compounding benefits on the investment.

3. Bottom Line As an innovative alternative asset class, anyone can invest in Peer to Peer Lending regardless of net worth or income. Depending upon your investment amount and your risk tolerance, P2P lending could provide you with monthly cash flow and a decent source of passive income. The overall investment procedure is relatively easy to understand. Besides that, a lender has a total control over the choice of debt products he or she would want to invest. Get started today!