Entries Tagged 'P2P Lending' ↓
August 19th, 2008 — Debt, Long Term, Money, P2P Lending, Personal Finance, loans
There are two new trends in the banking world that may actually be very dangerous for consumers. Long term personal loans and interest only loans are gaining in popularity, especially in the wake of the housing crisis. While these may seem to be a great option at the time, there are many risks from these loans that should be avoided if at all possible. If you’re considering refinancing your home to an interest only loan, or if you are looking at getting a personal or car loan, it is very important to understand exactly what you are getting into before you agree to any loan.
An interest only home loan means that each month, you only pay the interest that you owe. At face value, this can save a lot of money and it may help you keep your home if you are refinancing. Even though interest rates are going up, when you’re not paying on the principle, your overall monthly payment will be lower. However, the part about not paying on the principle is the kicker.
At the end of your interest only loan you will not own your home. Instead, you will have to pay the principle, in full, in order to get the deed. Now, if you’re planning on selling your home after the loan is paid off, this may not be as dangerous. However, with falling property values and a down market, this can be disastrous. In addition, by only paying interest, you will end up spending a lot more at the end for your home. In most cases, homeowners with this type of loan find that they spend $25k to $50k more for their actual homes.
Another issue with interest only loans is that you will not have the benefit of gaining equity in your home, even though you are making payments every month. If you end up with an emergency on your hands and need to get money quickly, you will not be able to draw on the equity in your home. This is a big problem that many people do not consider. Would you rather have lower monthly payments, or the ability to earn equity in your home with every payment that you make?
Next up, long term loans are becoming very popular as interest rates go up. Most people prefer to keep their payments as low as possible, but right now, that is pretty tough. The solution has been to roll out new long term loans, particularly for cars. As an example, you may be paying only $300 a month for your car, but you will have to keep making those payments for the next seven to eight years. Compare this to the usual time period of three to five years.
That is a lot of extra interest and many people may not even realize just how much extra they are paying. At the end of the loan term, you will have spent thousands more than the car is worth and by then, the vehicle has depreciated to the point where you will never get that money back. Long term loans do make it easier to make payments, but at the end of the day, you’re worse for the wear.
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July 10th, 2008 — Income Streams, Money, P2P Lending, Personal Finance, passive income
In the past, creating multiple streams of income required a lot of footwork and there were few passive stream opportunities available. However, thanks to the Internet, it has never been easier to create multiple streams of income online and many are passive! Let’s go into a few ideas that you can use to start your own income streams right now.
1. Blogging –
This is far from passive, but if you’ve got something to say, you can make money at it. It has never been easier to create a solid stream of income that can bring in a few hundred dollars a month or even more. Programs like Google AdSense can easily bring in that much and you never have to lift a finger (other than writing and networking like a madman). While there will be some expense involved, especially for marketing your new blog, it is minimal and much less than you would pay for other opportunities.
And why stop at one blog? If you’ve got a lot of interests, you’re just full of untapped potential. Start a blog for each one and take the time to build up your audience. You can easily turn than few hundred dollars into a few thousand dollars a month. For some people, that may be more than they make at their full time jobs.
Your opportunities don’t stop with advertising. You can join affiliate programs, set up your own products or keep branching out. The sky really is the limit when it comes to this type of income stream; however, passive it is not.
2. Peer to Peer Lending –
This is an interesting and potentially great way to make money online. Depending on your particular lending strategy it can even be fairly passive. There are numerous peer to peer lending sites that are seeking lenders and investors. You don’t need to be a bank – all you need is some cash and the stomach to take a little risk. Be sure to follow my tips at Making extra money with peer-to-peer lending.
3. Informational Products -
If you’ve got an idea or expertise in an area that is popular, write an ebook and start selling it online. You’ll never really have to do much work after it’s written and marketing costs are usually quite low. Your book will just keep bringing in money month after month. What is more – you’ll be building up an audience for future books to make even more money.
If you don’t want to write your own, there are numerous pre-written ebooks on every subject under the sun. You can purchase the resale rights and start making money right away. This is perfect if you want a nice little stream of passive supplemental income. Just remember to keep offering new books so that your market doesn’t stagnate.
4. Bonus Tip -
Combine tips 1 and 3… By adding an eBook to your blog you can potentially super charge your readership growth. Here are 2 examples of blogs trying to do just that… SF Boater with the free eBook Fishing in California, and Handyman Fix Home Repair with the free eBook The DIY Handbook.
These are just four ideas that can start bringing in income right now. There are countless others that are just as easy to implement. If you want to start making more money, the web is the first place to start.
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June 25th, 2008 — Banking, Income Streams, Investing, Money, P2P Lending, Personal Finance, credit score
Peer to Peer lending is quickly becoming one of the hottest new ways to create multiple streams of income. While there is risk involved, there are various methods that can reduce the risks that individual investors face and provide protection against non-payments. If you’re looking for an potential way to make extra cash every month, P2P lending is definitely worth consideration.
If you’re not familiar with how P2P lending works, it’s actually quite simple. Instead of going to a traditional bank for a loan, a person will visit one of the many P2P sites that are in existence right now (Prosper for all loans and Fynanz for student loans are the only one for p2p lenders at the exact moment but Lending Club may reopen soon and Loanio has been in beta for some time…). They’ll post their loan request and the lenders in that P2P community can go over it. Sites will run the credit rating of posters to determine how risky they are, be careful of borrowers with bad credit or even good, but unusual credit. You are looking for very clean borrowers with 5 years of credit history, no public records, 0-2 inquires in the last 6 months, for reasonable loans amounts, with a story that makes financial sense.
After the loan opportunity has been posted, lenders or investors will browse through and see if they want to take that risk. Most of the current P2P sites allow sharing of loans so that the risk is spread around. For example, if someone needs a $9000 loan, instead of one lender offering the whole amount, thirty lenders may each provide $300. The interest rate payments will be equally divided among those lenders based on much of the loan they purchase. As with everything make sure you diversify, ideally you would want AT LEAST 30-50 separate loans.
The claimed returns on the Prosper Select Index as of May 2008 was 7.87%. There is a bunch of fine print that goes along with that number which is why it is essential to diversify and stick to very clean loans. While possible I wouldn’t trust anyone that claimed it was easy to earn out sized returns (15+%) on these marketplaces. Still, 7% is better than most savings accounts, especially since the rates are currently dropping. While it is a bit more risky than a certificate of deposit, it’s a lot nicer to earn two to four times the amount of interest on your investment.
When you’re shopping around for a P2P community it is important to find one that will provide you with the tools that you need to succeed. For example, they need to have a system in place for debt collections if someone defaults on a loan and they need to be able to provide you with an accurate assessment of the risks involved in making that loan. Currently the sites will not allow loan requests from those with credit ratings lower than 540 on Prosper, which can greatly reduce your amount of total risk, but even then you should stick to the higher credit grades (AA-C). Once you get 12 months of experience you might consider expanding beyond that range… personally I am not.
While there is no magic bullet when it comes to easily making money with P2P lending; however, you can easily make a nice little return on a small investment and you’ll have the benefit of being able to create multiple streams of income. If you’ve only got a small amount to invest and you don’t want to tie it up in a CD, consider giving P2P lending a try.
Keep in mind that any venture has its risks, but the benefits of P2P lending might outweigh them. By picking the right kinds of loans, you can reduce your own risks and manage your investments. Start out small and as you start to get larger returns you can invest more money. Overall, P2P lending is fun and lucrative, when managed properly.
I have read that P2P lending is addictive because it is like financial voyeurism. Funny, but true analogy.
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June 23rd, 2008 — Diversification, Financial Security, Income Streams, Money, P2P Lending, Personal Finance
Most of us would like the chance to spend more time with our families, work a lot less and still bring in a sizeable income. If you’re only going to rely on your current income, the chances of that happening are pretty small, unless you’ve got an incredible job. However, there are ways that you can achieve this dream and they’re a lot easier than you might think. You’re about to learn how to work smarter and less and still make more money than you are right now.
The key to working less is having more than one stream of income coming into your pocket every month. This is a sound principle for many different reasons. First, you’re reducing your risks by not having to rely on your main source of income to pay your bills and keep living well. You can spread that risk around and if you do lose your job, you’ll have the resources on hand to keep paying your bills until you can find a new one.
Another benefit of having multiple streams of income is that you can eventually phase out your full time job, if you’re making the right investments, and start working part time. The old adage that two part time jobs make one full time job is certainly true here. By creating another stream of steady income that you can rely on, you can eventually scale back your current hours until you’re working only part time. If you’ve got some really great streams of income coming in, you may even be able to quit that full time job and focus on these streams instead.
Ok, so we understand how multiple streams of income can make your life easier, but how do you get started? You’ll need to take a small amount of risk here if you want to get to the point of being able to spend less time at work, but it is well worth it. It is best to try to reduce these risks when you’re first getting started so that you don’t jeopardize your finances, but with smart choices, it’s easy to pick a great income stream.
Some of the most common forms of creating multiple streams of income are actually the most simple. Let’s say that you have a knack for fixing cars. During the day, you’re a buttoned down corporate worker, but on the weekends, you’re a car fixing fool. Start taking on outside work during those weekends and boom – you’ve got your first income stream coming in. As word of mouth travels, you’ll get more business and it will most likely pay better than your current job.
Other streams of income include investing in P2P lending, other business opportunities, or even stocks and bonds that have a steady rate of return. The main goal of using multiple income streams to work less is to stop treading water at your job and start doing what you love while you’re getting paid for it. With the right amount of dedication, you should be able to go part time or even quit your old job.
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