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 . 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 9.6%. 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.
Photo Credits: 1
Originally posted 2008-11-28 09:01:16. Republished by Blog Post Promoter
Related Posts -
These Things are Hurting your Credit Score A person's credit score has become very important in this day and age. Your score is what creditors and lenders look at to quickly decide if you are a good or bad risk to lend credit to. It is important that you learn what types of actions hurt your score...... -
Understanding your FICO Score pt 1 FICO scores, maintained by the Fair Isaac Credit Organization, are calculated from a number of different pieces of credit data that is found within your three credit reports. There are five different categories of data that this information can be grouped into. There are specific percentages that reflect how important...... -
What Is In Your Credit Report? Although every one of the credit reporting agencies is going to format and then report their information in a different and unique way, all of the various reports are going to contain basically all of the same information and categories. Your SSN or social security number will be listed, along...... -
Seemingly Harmless Activities May Harm your Credit Your credit score is a vital number that determines how businesses and financial institutions treat you. Everything we do financially has an effect on our score, for good or bad. What surprises many people is how seemingly minor or harmless activities can have a big, negative impact. Described here are...... -
What is the Best Credit Score? The calculations that are used to arrive at your credit score are actually based on a lot of different statistical data, and they are based on objective evaluations. You receive points based on a number of different unique credit factors. Then, creditors are going to take all of this information......
Related Websites -
Insuring a Hybrid Vehicle This post is a guest blog written by Travis Overby. Due to environmental concerns and the rising cost of fuel, more people are looking to buy or lease fuel-efficient vehicles. In recent years, the sales of hybrid vehicles have grown in leaps and bounds. Not only do hybrid vehicles decrease...... -
Sports Memorabilia Sports Memorabilia -> Autographs Original -> Cards Out of all of the different kinds of memorabilia, perhaps the one that collectors seek the most is sports memorabilia. There is something special about finding that special item from a player you admire, or a memento from a game that meant something...... -
Bushnell 5x20 Golf Scope Rangefinder (Silver) User Reviews Send this to a friend Bushnell 5x20 Golf Scope Rangefinder (Silver) Manufacturer: Bushnell Customer Rating: List Price: $24.99 Sale Price: $11.60 Availibility: Usually ships in 1-2 business days Buy Now Product Description Bushnell has introduced a 5 power monocular that provides distance from 50-200 yards / meters...... -
Fun Facts about New Year's "Auld Lang Syne" was written by Robert Burns in 1741 and literally means "old long since," or "days gone by." This song is traditionally sung in many countries at midnight, January 1st, signaling the beginning of the New Year. "Syne" is pronounced like the word "sign," not "zyne." Some cultures...... -
Acoustic Guitar Accessories Regardless of whatever type of acoustic guitar you end up getting, the accessories that you choose are going to play a vital role in protecting the investment that you make. As you read through this list of accessories and equipment for your acoustic guitar, keep this in mind: Not all......
- With Months And Instructions Sundials Garden Decor Yard, Garden & Outdoor Living
- For Moist Shady Sites Shrubs Plants, Seeds & Bulbs Gardening & Plants Yard, Garden & Outdoor Living Nursery
- With Months And Instructions Sundials Garden Décor Yard, Garden & Outdoor Living Nursery
- Parts Doll Making & Repair Dolls Dolls & Bears
- Coffee & Espresso Making Small Kitchen Appliances Kitchen, Dining & Bar Home Store
Categories:
Banking, Income Streams, Investing, Money, P2P Lending, Personal Finance, credit score
Tags:


18 comments ↓
Very good write-up about P2P lending. I’ve been involved with it for about 6 months now, and have been happy with the results. I know the loans aren’t guaranteed, but I only have a very small portion of my portfolio in P2P loans – basically my “fun money.” This satisfies my need to try new things, while keeping my risk low. So far, I haven’t had any delinquencies.
@Patrick
Good Luck… I have been doing for almost 2 years. It has coming a long way since I started… I still don’t have a giant sum of money in play, but it is beginning to become quite significant.
hello i need help to get a loan my credit score is perfect i have comercial property and need to find out if you can help me thank you
Don’t forget Fynanz. They’re open to lenders…have been since March. http://www.fynanz.com
They’re P2P lending for student loans – REAL student loans that have been underwritten according to traditional guidelines. Fynanz partially or wholly guarantees loans, verifies that students are actually enrolled and that they’re going to use the funds for qualified educational expenses. Loan disbursement is check written out to borrower AND school. So there’s no funny business going on there (ie, you know there not going to blow it on something other than school). Fynanz also has loans that are co-signed by parents. I think all this adds up to better risk scenario as compared to loans on Prosper that are listed as “student loans” – they’re not.
Also, Fynanz is offering some cool lending bonuses to lenders…3% if you lend $3000…5% if you lend $3000 + refer 5 friends. That’s a big bonus on top of the rates the loans are already paying.
[...] Rich Credit Debt Loan is Making Extra Money With P2P Lending [...]
@yolanda
I wish you the best of luck…
I am not into funding projects pitched to me over the Internet from an unknown person, but I do appreciate your enthusiasm. Put a listing on a p2p marketplace you will be happy with the results.
Perhaps we will meet some day through my trusted channels.
[...] from Rich Credit Debt Loan wrote about making extra money with P2P lending . If you are interested in P2P lending, this is a good article to [...]
[...] Rich Leverage summarized peer-to-peer lending in the post Making Extra Money With P2P Lending. [...]
[...] Making Extra Money With P2P Lending [...]
[...] go back and do it again? I would follow advice very similar to Rich Credit Debt Loan in the post Making Extra Money With P2P Lending. I have learned a lot about credit risks and the like, but I would have much rather been more [...]
[...] 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. [...]
Vestorbid.com will be one of the best p2p lending companies soon. Their qualifications are lower than most others, and you can invest as little as $25.00 to get started lending to others. I went to the website and left my email address for more information from them, and with the info that I read, Im definitle telling all my friends and family about Vestorbid.com.
Coming Soon!! Sounds like a great company.
[...] now is the premise of creating multiple streams of income. While everyone wouldn’t mind making a little extra cash, there are even more benefits that can be reaped from having more than one source of income. [...]
[...] are two new trends in the banking world that may actually be very dangerous for consumers. Long term personal loans [...]
[...] 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. [...]
P2P lending is a viable investment vehicle. Keep in mind the loans are unsecured. Read the prospectus carefully and understand the risks involved.
I definitely agree P2P lending can be profitiable, interesting, and also a type of charitable cause depending on the borrower. But I would urge readers to pay close attention to the statement “look for clean borrowers”.
I started using Propser a few years ago and mixed in several loans at higher rates to folks with “good” credit, but not “great”. My experience was a very high % of defaults. Part of that may be due to the economy and part may be due to me not being selective enough….I was experimenting with different ranges of credit. At any rate, lesson learned, be selective!
Leave a Comment