A Peer-to-Peer Lending Review: 8 Things to Consider Before Investing
Before we get started with a peer to peer lending review, let’s start with the basics. We’ve all heard of investing and to a degree are familiar with what it’s all about, right? You put your money into a business, cause, or idea and generally expect to receive a return. Simple. Investment for a long time, however, has been reserved for the likes of bankers and other such traditionally wealthy folk. In other words, it wasn’t something to which your average Joe was overly accustomed!
Fast forward to the tail end of the financial crisis of 2008 and a new kid had arrived on the block: a new form of investment shook the world of investing to its very core. For over a decade this method of investment has provided normal people all over the world the opportunity to invest their hard-earned money and generate a return from their capital. Only with us, your money is automatically invested across a number of property-based loans and developments.
First things first though, if you’re thinking about investing via peer to peer lending companies, there are a few things that you should take into consideration. After all, this is a peer to peer lending review, let’s get stuck in!
1. Remember, Rome wasn’t built in a day
If you’re looking for a fast return on your cash, then peer to peer lending is probably something that you should avoid. Furthermore, the sometimes-unpredictable nature of peer to peer lending can mean that things don’t always go to plan. If your financial goals aren’t quite as immediate however, peer to peer lending definitely could be something to you could take into consideration.
2. How comfortable are you with risk?
Just like any type of investing, peer to peer lending comes with its inherent risks. Essentially, when you invest your money, it’s never guaranteed that you will get it back. Whilst the interest rates offered by peer to peer lending companies may be attractive -especially when compared to the likes of the banks- they are more prone to risk, and have a higher likelihood of things not going to plan.
3. Do you understand what it all means?
Can’t quite get your head round the prospect of peer to peer lending at first glance? Don’t worry. If you’re not sure about something, make sure that you do your research before taking the next step; as they say, ‘it’s better to ask a question and be fool once, than never ask a question and be a fool forever.’
4. Are you being realistic with your finances?
Before getting bogged down with the nitty gritty details of a peer to peer lending review, it’s important to consider to what extent investing is achievable for you. Do you have enough money to spare for investment? If the answer is no, then investing probably shouldn’t be your first priority. If you can’t afford to lose what your spending, it would be wise to take a step back from investing and realign your financial priorities. Many financial advisers propose that as a baseline, it’s wise to have an emergency cash fund of about three months wages. Whilst obviously subjective, it’s always important to ensure that you invest on your terms and your terms alone.
5. Have you already got existing investment capital?
Since 2016, many peer to peer lending companies have been able to provide investors with an alternative to cash ISAs in the form of Innovative Finance ISAs. If you have capital tied up in cash ISA, you can now transfer this cash to peer to peer lending companies via an IF ISA. By transferring your capital to an IF ISA you will enjoy the accompanying benefit of a significantly higher interest rate. Whilst the rate may be higher, however, it’s important to remember that alternative finance platforms are subject to an increased amount of risk.
6. Are you tempting fate?
General consensus within the investment industry dictates that putting all your eggs in one basket isn’t ever really a good idea. Instead, it’s normally argued that by diversifying your investment portfolio (your investments as a whole) and putting your money into various investments you are exposing yourself to a lower amount of risk. If you’re taking your first steps into the realms of peer to peer lending, it always helps to be prepared to look at various types of investment to reduce your chances of experiencing your investments falling through en-masse.
7. If you’re unsure,get advice
If you’re unsure whether you can afford to start investing, or are unfamiliar with the potential pitfalls associated with investing, there’s no harm in seeking professional advice in the form of a financial advisor. If you’re undecided, inexperienced or otherwise, it can sometime be beneficial to leave it to the professionals!
8. Don’t be afraid to get savvy
The world of peer to peer investing is positively brimming with reputable and trusted peer to peer lending companies. As this is a peer to peer lending review, it’s important to acknowledge that some platforms may be more reputable than others. To find out which ,visit the official FCA website to see a list of accredited platform. There’s so much choice in fact, that it may at first appear that little bit intimidating! The fact of the matter is, no two platforms are the same, and each will have its own inherent strengths and weaknesses. Some may be able to offer benefits that are more appropriate to one investor than the next. When doing your research make sure that the criteria of the investment platform meets your needs and not vice versa.
Don’t let us speak for you. Whilst we may have conducted our own peer to peer lending review, it’s important that you conduct your own research and find the best fit for you. If you’re looking for a place to invest, allowing you to earn an attractive return compared to what the banks are offering, look no further than The House Crowd. Earn up to 10% p.a. on investments secured by UK property.