How to Start Peer to Peer Lending
Are you wondering how to start peer to peer lending? If so, you’re part of an ever-growing audience! An increasingly large part of the peer to peer lending industry, property investment has increased in both size and popularity over the last few years. In fact, the whole premise of property investing has become so ingrained within our every day lives that it’s become a staple feature of our daily tv schedules (some of us more than others…). From Homes Under The Hammer to… well, any number of innocuous property shows dominating our TV screens, property investment has been made out to be a relatively straightforward and inconsequential affair. Well, unfortunately, it’s not quite as easy as you might think. But, as it happens, for those exploring how to start peer to peer lending, property investment is an ideal place to begin. Don’t know where to start? Thankfully we’re onboard to give you a helping hand
Where to start?
1) A good starting point would be to identify and outline your objectives. Why do you want to get into peer to peer lending? How can it help me to achieve my financial goals? Remember you need to stay realistic. Any type of investment is subject to various elements of risk and things might not go to plan. Risk (among other things) is definitely something that you should bear in mind, especially before determining any specific plan of action.
2) Once you’ve decided why you’re going to dip your toes into the world of peer to peer lending, the next logical step would be to determine how you’re going to go about it. As we’ve mentioned before, the world of peer to peer lending is especially wide and varied. With any number of different sectors to invest your money, you’re spoiled for choice. One distinct benefit of investing through, property investment, however, is that through platforms like The House Crowd your loan is secured by way of a security property- either 1st charge or 2nd legal charge. This way if something were to go wrong you would be able to recoup at least some of the money that could be potentially lost.
3) Choosing your peer to peer lending platform can feel like wading through treacle at the best of times, but it ’s important to bear in mind what you need to get out of it. As we quite often say, you need to make your money work for you, not the other way around.
4) Once you’ve homed in on a particular platform, it’s always worth exploring their background, history and track record for losses. By doing this, you can better determine how a company performs. Although, you should realise that this is not a sure-fire way to guarantee success.
5) What product should I choose? If like The House Crowd, the platform that you choose offers a number of different products, it’s wise to take a step back and analyse what would be the best fit for your particular circumstances. At The House Crowd, for example, we offer a range of different products, each with their own distinct advantages to our investors. Our peer to peer bridging loans, for example, operate on a short-term basis and are best suited to those who want to earn returns on their money in a relatively short period. In some cases, these loans have extended to as little as 3 months! Our IF ISA, on the other hand, offers a longer-term time but allows investors to invest up to £20,000 completely tax-free.
6) Don’t put all your eggs in one basket. The golden rule of investing (not there are any definitive rules) is that it’s probably not the best idea to put all of your money into one particular investment. By spreading your capital you’re essentially reducing the potential for things to go wrong, and the amount of risk that you are exposed to. It’s all down to how much risk you’re comfortable with. To paraphrase one of peer to peer lendings better-known proponents (probably not but you never know) Clint Eastwood, “you feeling lucky punk?”
A few final words
When you find yourself traipsing the internet, slack-jawed at the alarmingly high-interest rates on offer, bear one thing in mind. Those alarm bells are ringing for a reason. The rule of thumb is- generally- that the higher the interest rate, the higher the risk. Whilst it may sound attractive at first glance, you need to anticipate the potential pitfalls that might come with it. The crux of it all? Invest in something that you’re comfortable investing in, and most of all, something that your financial situations allow for. At The House Crowd you can invest from as little as £1,000 and benefit from the security of a 1st or 2nd legal charge, every time! When tentatively exploring how to start peer to peer lending, it’s imperative that you do your research and always make sure that the platform you are about to invest with are reputable and licensed practitioners. One effective way of determining this is by checking whether they are accredited by the FCA (which we are). The FCA stamp of approval is a solid indicator of a platform’s transparency and integrity. Don’t know who the FCA are? Click here.
If you’re still unsure about the next step to take, or where you should go from here, feel free to get in touch with our dedicated member support team today, who would be more than happy to help.