P2P is a relatively new concept, but at the same time a very interesting way of allowing passive money to flow in.
And the risk is less than with, for example, investing in shares.
Moreover, you can start with a small investment, even from 1 US dollar!
And the 19% yield is not bad either.
Yes, that is a lot more return than on your savings account, isn't it ?!
Peer-to-peer, also referred to as P2P , is in fact a way of lending without the intervention of an agency such as a bank. Private individuals lend money to other private individuals. So, for example, you can lend money and then charge interest on it . That means that you can earn with it.
The reason people want to take out a loan through such constructions is because they do not want or cannot apply for it through a bank or lender. A bit of the same reason that people are starting to appreciate more and more crypto coins: being able to arrange money matters without too many rules. Less difficult questions are asked and you do not immediately have a BKR registration on your pants.
The reason people, on the other hand, are willing to invest in these types of loans is simply the merit . This is not only much higher than the savings interest you currently receive, but even much higher than deposits or many ways of investing on the stock market.
Lending money to complete strangers is of course not possible just like that, so special online platforms have been created here that bring together supply and demand. People who need a credit can apply for it and people who do want to invest in it can then comply with that application.
Because the platforms just bigger amounts can split over a plurality of investors (just as crowdfunding), it is feasible to easily obtain a desired target amount to. A lot of small efforts from several investors together still means that one can reach the target amount. For example, if someone needs 1000 US dollars, this can be achieved because 100 people only put in 10 US dollars.
On the other hand, this offers investors an opportunity to spread their investment over several loans. This reduces the risk of non-payment, although the platforms have also built in extra security here (more about that later). So if you want to invest, for example, 100 US dollars, you can spread this over many different loans.
With some platforms this spread is automatic, with others you can select the personal loans yourself (for example, those in certain countries or with the highest interest yield). The buyer of the loan will then pay you monthly amounts including interest. Just like you are a bank. Sometimes you can also choose to get everything paid out at once at the end of the term, then you have more interest profit.
How much you can earn with it is directly related to the loan interest, which is your profit, but it is also regulated by law. In the Netherlands it is not as high as abroad. That means that you make a higher profit with foreign platforms. Within the Netherlands you can count on about 4%, outside of that this can rise to no less than 19% on an annual basis.
How much you earn in absolute terms, so not in percentage but really in euros, depends directly on your investment . If you invest 1000 US dollars, you logically earn twice as much as if you invest 500 US dollars. Realize that investing always involves some risk and that you do not use an irresponsible amount of capital for this. If you suddenly need the money quickly, that is not always possible within a few days.
In principle, you can make a simple division into platforms: platforms in the Netherlands or abroad. We are not going to recommend that you choose one of the two options, because this is a consideration that you have to make yourself. As we have also indicated in the previous paragraph, this is mainly a difference in potential profit. We can tell you which platform in NL is the best, and which outside NL:
|Mintos||Lender & Spender|
This is of course the most important question. In the introduction to this article, we quickly made the claim that it has less risk than investing in stocks. Now you cannot compare this one to one, because there are clear differences. Shares and comparable instruments such as options, bonds, etc. are subject to price fluctuations . You will make a profit if you do it right, but this is very unpredictable and depends on demand and supply on the stock exchange.
Peer to peer, however, are fixed contracts with a fixed interest rate, and therefore a fixed profit. The risk that exists here is not a fall in price, but that people will not repay the loan they have taken from you. Due to the legislation on consumer loans, this risk is formally low . They simply have to pay back according to the contract. Of course, the platforms pay extra attention to this, because that is also a risk for them!
Mintos even has a repayment scheme : if the borrower does not repay, they will pay you back the loan in full! Even if a borrower is a few days late with a monthly payment, Mintos will advance this. That's very neat! However, be aware that Mintos is a foreign company, so it does not fall under the law in the Netherlands. Bankruptcy is therefore a thing here.
Lender & Spender only lends money in advance to people with high creditworthiness. Only people with a job receive a loan after an income and BKR check. The risk of non-payment is therefore already very low, and if this happens anyway, Lender & Spender will assume non-payment with regard to settlement and start a payment arrangement or, if necessary, a collection procedure.
As an investor, you will also be paid any fines and extra interest that the borrower has to pay, so you will be compensated for any repayment of your investment later. They have also thought about possible bankruptcy: the loan has been placed with a separate Ltd so that you as an investor will not be affected if Lender & Spender itself ever goes bankrupt, quite smart!