Are you looking for alternative investments?
Have you heard about crowdlending but haven’t yet decided to invest?
Here are the top ten reasons why I invest in P2P lending. I tell you, as always, in simple words, so that everyone can understand.
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10 reasons why I invest in crowdlending
1. It’s easy
It’s simple and easy to understand. In crowdlending my money is lent to other people or companies, and I receive the money invested, plus interest. ( Here you will find more information about what crowdlending is)
You don’t need to have extensive financial knowledge to start investing.
Many crowdlending platforms make it very easy for you to invest without complications. In some, such as Bondora, with the Go&Grow option, you can start investing with just one click.
In addition, you don’t need to keep an eye on the news as you do with stock market or cryptocurrency investments.
2. Good profitability
The profitability is higher than what you will receive in a savings account. With some P2P platforms you can earn more than 10% per year on the money invested.
You might think “of course, the risk is also higher”, right.
3. Moderate risk
There is risk, yes, as in all investments (and everything in life), but it can be minimised. Both the risk of default and the risk that the platform in which you invest will go bankrupt can be can be reduced by diversifying your investment. So in the event that something like that happens, you will only lose a small amount of your money and not all of it.
In addition, to cover the risk of default some platforms offer a buy-back guarantee. In the event that the borrower defaults on the payments, the loan originator buys back the loan from you. With this guarantee you will not lose your money in case the borrower will default.
In my opinion the risk and return are balanced.
4. It is not a volatile investment
This means that the amount you expect to earn will not vary much from what you actually earn. It is predictable. You know that if you invest 50 Euros in a P2P loan and the interest rate is 10% per year, at the end of the year you will have earned 5 Euros in interest. Of course, extraordinary circumstances can happen, such as the borrower deciding to repay the loan early, or defaulting on one or more instalments. But you will know in advance what would happen to your money in such cases, by reading the loan and platform conditions.
5. It is truly passive income
Who doesn’t want to have passive income? In crowdlending investments do not need your attention, they are really passive. Of course, it is good to periodically check the platforms you have invested in to make sure that everything is set up correctly, that your money is being invested and that you are receiving interest as expected.
Most platforms have the auto-invest option. Once you set it up to your liking, indicating the amount you want to invest, what type of loans you want to invest in, how much you want to you want to invest, in which type of loans and other parameters, the platform takes care of investing for you. You don’t have to do anything but wait to receive the interest.
6. It is possible to invest in the short term
It is possible to invest in the short, medium and long term. You can invest your money for as little as 30 days. Some platforms have loans for terms of less than one month.
7. I can invest from a very small amount
The vast majority of platforms accept a minimum investment of between 10 and 50 euros. On Bondora you can even invest from as little as 1 euro.
8. I get consistent returns
Borrowers pay monthly instalments and you receive the interest.
Unlike other types of investments where you only receive interest when you sell, in P2P lending you will receive interest on a monthly basis. These profits can be reinvested or withdrawn.
In addition, because the payday of each loan is different, you will see how you receive interest every day, or almost every day. That is very motivating.
9. I can get the money back whenever I want
I don’t invest money that I might need, but unforeseen events sometimes come up and if I need the money I can get it back. As I receive interest on a monthly basis, I would not lose my earnings by getting the money back early than expected.
Depending on the platform you invest on, if you need to get your money back, you will usually have it available to you within a couple of days or a few weeks, selling your investments on the secondary market. In addition, you can get back only part of your money or all of it all of it.
10. I benefit from compound interest
Compound interest is the accumulation of interest that is reinvested again to generate more interest. It works like a snowball that gets bigger and bigger.
In P2P lending, as I receive monthly interest, I can reinvest it immediately and benefit from the compound interest.
These are the reasons why I have decided to invest in P2P lending. Do you have other reasons to invest in crowdlending?
