Peer to peer lending can be a great deal for investors, since they may be able to earn a higher return on their money than through other common alternatives. It can also be a great way to diversify one’s investment portfolio.
Many investors have received average annual returns of about 10% over the last few years. That is a pretty solid return, especially during today’s low interest rate environment.
Benefits of Peer to Peer Lending
Here are some of the pros of peer to peer lending:
- Potential for earning very high returns, even in a rock bottom interest rate environment.
- Well diversified investors have received higher returns in the last few years than they probably would have on most other types of notes and bonds.
- Well diversified investors who invest in high quality loans have rarely lost money.
- Peer to peer lending sites provide a lot of information about potential borrowers, making it a very transparent way to invest.
- I generally recommend to people that they only invest in things they can understand. Most people can learn the basics of peer to peer lending without much difficulty.
- Low investment minimums and an automated diversification option make it incredibly easy to invest in hundreds of different peer to peer loans in no time at all.
- Peer to peer lending sites generally perform an initial screening of the loan applicant.
For additional information about investing in peer to peer loans, see our peer to peer loan articles in the Personal Finance section of the site.