If you have some extra cash burning a hole in your pocket, well, good for you.
If you’re looking for ways to turn that cash into more cash, consider Peer to Peer Lending, also known as P2P Lending (also also known as ‘Social Lending’).
There are now a number of Peer-to-Peer Lending systems available and P2P has quickly become one of the most popular ways of generating passive income in 2023.
So let’s breakdown what P2P lending is, how it works and how you can get started…
What is Peer to Peer Lending…
First, let’s get what it is not out of the way. It’s not handing out cash to your friends and charging a vig. We don’t encourage becoming a loanshark.
So, what is it?
Peer to Peer Lending (P2P) is a relatively new form of lending that allows individuals to lend their money to other individuals (or businesses) without the need for traditional financial institutions; i.e banks, as middlemen. Instead of using a bank, transactions take place on lending platforms that connect individual borrowers with individual lenders.
The growth of these platforms, along with the significant increase in folks looking to build additional revenue streams, has driven the popularity of P2P Lending. Not only is it a fairly seamless process for investing, it’s also an attractive alternative to traditional savings accounts or certificates of deposit because of the higher return potential.
And while lending your money to strangers over the internet may seem risky, or even scary, (there was also a time we wouldn’t get into cars with strangers and now we summons them with our phones thanks to Uber); P2P is in fact a fairly low-risk endeavor.
Why you should consider P2P lending…
- P2P lending platforms typically offer higher interest rates to borrowers, which in turn allows lenders to earn more on their investments.
- One of the main benefits of P2P lending is that it can provide a higher rate of return than traditional investments such as savings accounts or bonds.
- Peer to Peer lending platforms typically perform thorough credit checks on borrowers and only approve those with a high credit score, making lending low-risk and the possibility of defaulting significantly lower than traditional forms of lending.
- Unlike traditional investments, Peer to Peer lending offers a high level of flexibility. Allowing you to choose your own level of risk by choosing which borrowers to lend money to and for how much.
- Tailor your investment to your own risk tolerance and financial goals.
- Automate your investments for truly passive gains on your money. Platforms typically allow you to set your criteria for investing and will automatically lend money to those that fit your defined parameters.
- Full visibility into where your money is going and more importantly how much is coming in through monthly statements and instant access to your accounts.
- Getting started is simple.
How to get started with P2P lending…
Getting started with P2P lending is relatively easy. Most P2P lending platforms have a simple sign-up process and can be done online.
It’s important to do your due diligence and research different platforms to find one that suits your needs and has a good track record, but here are three to help get you started:
Founded by three ex-Google employees, Upstart is one of the more innovative peer-to-peer lending platforms available using AI/ML to asses borrower risk and decrease loss rates.
Considered the OG of Peer to Peer lending platforms, Prosper gives lenders many options on loans to choose from, with seven different “risk” categories, each providing various levels of returns.
As the name suggests, SoLo is a great place to start for those looking to dip their toe into lending without risking large amounts of cash, loans max out at $575 with no minimums.
Peer to peer lending is on the rise in 2023, and it’s a great way to start earning passive income for those who are open to a little a risk, and have the money on hand to start lending.
But peer to peer lending is just one of the many ways folks are starting to earn passive income. Take a look at these other 15 ideas for ways to make money online and build your passive income streams.
*Disclaimer* As always, Drip.Fi does not give financial advice, we just provide you the tools to help you on your money-making ventures. We always recommend doing your own research and if you still have questions, consult with a financial advisor prior to any investment decisions. Some of the links in this article may be affiliate links in which we earn a commission should you pay for a product or service, this happens at no additional cost to you.
