Investing that very first buck can be scary. Not knowing where to begin and what to look for, can hesitate you from starting. If you feel in doubt or hesitant, don’t worry we all have been. This 6 tips guide can get you started in P2P lending space. I want to show you how you can profit, avoid the most basic mistakes and decrease the risk of your investment.
Peer-to-Peer investing has been getting a lot of attention lately and though it’s great for us to have many options, we have to make sure we are aware of all the risks and strategize our investments. Long gone are the days, where businesses either have to go through the bank for a loan, or else pitch to investors to raise capital. Nowadays it has become accepted and is possibly the fastest way for a business, project or an idea to raise capital through P2P lending streams. And for us on the other hand, with bank interests low (+/-0.5%) it would be silly not the get a PORTION of those savings and invest them in something that yields better returns.
📒 Open P2P Lending account
To simply begin, you need to open an account in one of the many P2P platforms. I have written a list highlighting a quick summary of every platform I am invested. Also check out my portfolio page to see how my investments are doing. Always take advantage of a signup bonus by using one of the referral links on the site, that way you start earning money from day 1 and I also get a small bonus (A win-win). Once you signup you are asked to verify your account. This is a normal KYC (Know your customer) procedure, where you are asked to upload some sort of ID proof.
🏦 Deposit money
Once your account is open and verified, its time to deposit money into your P2P account. This is when you make a transfer from your bank to your account. Make sure to follow the guidelines, all of them have an investor account to type into your bank description box. Keep in mind that aside for mintos, most platforms I recommend only accept EUR. If you don’t have a EUR bank account the easiest way to invest is by getting Revolut – a fintech app bank that makes it easy to load money, exchange to different currencies with no extra costs and transfer money to your accounts. Revolut is highly recommended for travelers to spend money at zero costs. Some platforms like bondora allow you to add money through a debit card like Visa.
🔐 Choose your project – Unsecured vs Secured loans
Choose your project wisely. Plenty of P2P platforms offer secured loans and its always wiser to invest in secured loans. Other platforms offer “Buyback Guarantee” meaning that if the repayment is delayed by more than the specified number of days, then the loan originator has to buy back the loan.
🤗 Reduce the risk by diversifying your portfolio
Never throw all your savings into one platform and never thrown that portion of investments into just P2P. Diversification is key to success. If something goes down you wont go down with all of your money. If you check my portfolio page you see a diverse range of P2P investments but I also put a smaller portion in crypto (high-risk investments), have a big portion in the bank (low-risk) and also buying my 2nd and 3rd property. Always diversify and spread your money to reduce the risks. If you are about to invest €500 open 2 to 3 account platforms and spread €500 through those platforms. It can be equally or however, you want. Use small amounts in a number of projects. For example, on Grupeer I invested in 45 different projects, a total of €450 with €10 investment on each project (Avg 12%).
💸 Re-invest your earnings
One of the greatest things about P2P lending is that as an investor you start seeing returns after month 1 of investing. That makes it possible to make your earning go back to work and invest them in other projects. This is what is called compound returns on investments, meaning the returns from earlier investments are further re-invested. This will be longer when you only invest a small portion but once you get comfortable and start earning €50, €100 or more a month would be easier to build on.
📈 Track your earnings
This is something I need to improve on myself, however, make sure to know what is going on with all your investments. There are tools out there that make it easy to track and report your earnings monthly. See whats working for you and what’s not and build on that success.
Check out my Signup bonus summary page for more platform info.