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Frequently Asked Questions
Peer-to-peer (P2P) lending (commonly known as P2P investing) gives investors the opportunity to directly invest in loans from other individuals, where banks or other financial institutions are cutted out as the middleman. This works as follows:
Consumer finance companies issue loans to their clients;
The already issued loans are listed on a marketplace;
Via a marketplace an investor can invest in these loans and earn profit.
P2P lending or investing is also known as crowd funding or social lending, ranging from investing in businesses, social projects or others.
Peer-to-Peer lending is safe, but as with making any investment P2P lending involves a certain amount of risk. Mainly, three risks can be identified:
The borrower defaults and is not able to pay back the loan;
The loan originator goes bankrupt;
The platform or marketplace goes out of business.
Armed with this knowledge, the question is whether how these risks are mitigated:
Is there a buy back guarantee or any form of collateral, which ensures in case of default of the borrower you’ll get your money back?
Only use trusted platforms and well performing loan originators with a solid track record, like the ones being mentioned on this website. Also, when reading the reviews you will get a proper insights in the risks involded and how to minimize them.
Lastly, as a general rule: with investing comes risk and be aware that past performance is no guarantee for future results. Be aware of this, read more on this in investment tips.
If you are 18 years of age or older, you can usually start with P2P investing. The same applies for companies.
Eligibility to invest also depends on where you reside. For instance, if you are an EU resident, in most of the times you're qualified to invest on European P2P platforms.
Setting up an account and actually starting to invest in P2P is a rather easy thing to do. Firstly, set up an investment strategy to make sure you invest wisely. Secondly, gather information about the platforms you’d like to invest in, you can do so here. Lastly, if you have picked a particular platform you can read in the reviews here how to get started specifically.
Usually, to start with P2P lending there are no costs involved. The costs of maintenance of the platform or any other costs involved are being paid for by the marketplace or loan originator.
There are multiple P2P lending sites with very decent track records. For example, amongst others, these are EstateGuru, Lendermarket, VIAINVEST and Mintos. The best P2P sites can be found on our site here and are updated regularly.
Couldn’t find what you where looking for? Find more answers to your questions here.
Understand risk in investing
Investing is not without risk. It includes the possibility of losing some or all of an original investment. Before you start with investing, determine how much risk you are willing to take and what kind of investments are suiting your needs. Only use money that you don’t need right away or will get you into financial difficulties.