Five Advantages of Peer to Peer Lending
The advantages of peer to peer lending lie, to some extent, in the disadvantages associated with other forms of lending. Traditional investment options have long disappointed consumers for a variety of reasons: high street banking accounts and cash ISAs might be simple, but returns are often lower than they’d like. Though it comes with its own pros and cons – like any other form of investing – there are certain benefits of peer to peer lending for those looking for an alternative, particularly when high-value assets such as property are involved.
Here are five peer to peer lending benefits you can experience if you choose to invest through The House Crowd.
1. Predictable, Consistent Returns
Every secured peer to peer loan at The House Crowd comes with a fixed (albeit not guaranteed) rate of interest. This means that the investor has reasonable and realistic expectations about their profits – a far cry from the tumultuous nature of investments such as stocks and shares. And, for those that have neither the time nor the in-depth knowledge to actively manage a portfolio, peer to peer lending platforms like The House Crowd – with the capability to automatically invest on your behalf – making the whole process hassle-free.
2. Higher Returns…
One of the core peer to peer lending advantages is that returns are more consistent – but they’re also typically significantly higher than can be expected from a standard savings account. Between 2015 and 2018, The House Crowd investors enjoyed, on average, returns of 9.2% p.a. (average returns by year: (2016 = 8.8% p.a., 2017 = 9.7% p.a., 2018 = 8.9% p.a.). However, past performance is not a guide to future performance.
3 …and Lower Commitments
In a volatile housing market, consumers must be able to protect themselves. With 3 to 12 months until the typical loan matures, peer to peer property lending doesn’t tie up investor cash for years. Investors also have first call on all profits, and because properties are priced conservatively to expedite sales, it’s possible to earn up to 10% p.a.
4. Managed and Mitigated Risk
Peer to peer investing platforms ensure that you don’t over commit to individual loans: most make it easy to spread capital, managing and mitigating risk. With our Innovative Finance ISA (also known as a peer to peer lending ISA) we can automatically diversify your portfolio across a number of loans, as far as is practical. All of The House Crowd’s loans are secured against tangible, UK property assets at a conservative Loan To Value (LTV) ratio, providing protection in the event of a property falling in value. Some P2P platforms in the UK are regulated by the Financial Conduct Authority, which means you can be sure of complete transparency when it comes to risks and returns.
5. Low Entry Point
Property investing typically comes with high barriers – and peer to peer lending tears them down: investors can get started with £1,000 instead of tens of thousands. If an investor wants to test the waters, they can. It’s a more democratic approach to investment – one that opens the markets up to anyone with a nest egg, not just wealthy financial institutions and high net worth individuals. If traditional investments aren’t suitable, or if the investor demands better returns, lower commitments, and manageable risk, then the advantages of peer to peer lending are plain to see.
Start your secured peer to peer lending journey with The House Crowd. Register today or contact one of our specialists to learn more about the advantages of peer to peer lending for lenders and borrowers alike.