Why To Invest With Peer To Peer Lending

Peer to peer lending (p2p lending) as an investment is a fresh and new concept that has a lot of people talking.  Peer to peer lending has many benefits for the borrower but even more for the investor.  Like many for whom it is new, you might need some clarification on exactly what peer to peer lending club actually is.

Peer to peer lending is when money is borrowed in a transaction that takes place between two private individuals without the need for approval from a bank or lending institution.  This process benefits borrowers because they are in direct touch with investors and therefore do not have to go through all of the applications and formalities of a personal loan.  Or to put it more simply, peer to peer lending cuts out the middleman.  This can mean not only more convenience but it can also mean you get the money fast.  

Investing in peer to peer lending is a kind of alternative way to invest money.  It is alternative because banks are not involved but it is this simple fact can mean a better return on your investment.  Now here are some further reasons to think about peer to peer lending as an investment.

To begin investing in peer to peer lending you need very little start up money.  Actually, it can be as little as $25.  As you must know, this is not so with traditional investments.  Like mutual funds, for instance, can take thousands of dollars to start at a traditional bank.  With peer to peer lending you can begin with smaller amounts and end up opening your investment account sooner.

Another good reason for peer to peer lending is knowing that with each investment you are helping someone out.  You money is helping people who have fallen on bad luck and are trying to put their lives back together.  Your investment might help save a small business or help someone climb out of a pit of debt.  Being in direct contact with the borrower allows you to hear their story, letting you decide as you wish which borrowers you would like to help.

Peer to peer lending is a great way to diversify you investment portfolio.  Being in a separate class, consumer credit, you are investing in an asset class which is not generally available with most traditional investing.  Financial planners have said that diversification is important for a healthy portfolio.  Investing in person to person loans adds more diversification to your investment portfolio.

Lastly, we will benefit from p2p lending because it takes back control of our hard earned money from Wall Street and the traditional lending institutions whose greed and poor decisions led to the financial crisis we are still mired in.  With p2p we are in control of our lending.