Peer 2 Peer Lending TipsSep 26, 2016 Blog Marketplace Lending , Peer-to-Peer
If you are new to peer to peer lending, you could very well be wondering what the best way is to maximise your return and reduce your risk. As peer to peer lending is facilitated on an online marketplace, you as a lender are funding somebody else’s (borrower) need for funds. Thus your funds in this instance are placed into an unsecure loan.
Determine your risk tolerance before making your offer. The loans available to you will have a risk grading assigned to them. Familiarise yourself with each risk grading and establish which grading you are most comfortable with based on your risk and return criteria.
When making your first offer, it is recommended to keep the amount relatively low. This is the first time that you are going to experience lending on a platform and offering a low amount of money could prevent you from making any costly mistakes. As you gain confidence in your lending capabilities, increase the amount you are willing to lend, but remember, don’t offer an amount unless you are happy to potentially lose it.
Spread your risk by lending smaller amounts across a number of borrowers with different backgrounds. Lend to borrowers with different genders, ages, locations and credit scores.
In order to maximise your return, re-invest your returns from the loans which are currently paying you back. One of the easiest ways to do this is to make use of the automation service which immediately picks up a loan opportunity within your risk criteria as it lands on the platform.
Peer to Peer lending is still in its infancy and it’s extremely important to keep up to date and to do research on the industry as a whole. Subscribe to newsletters and be sure to read up on the information which is available to you to assist with your lending decisions.