The Best Way to Use Your Extra Funds to Offer Online Loans and Make More Money In The Long Run

Investing in companies or stocks is a great way to use the funds that you have at your disposal to make a profit, however, using these traditional methods can be tedious and extremely risky. Luckily, the growing online lending industry offers opportunities for both those who need to borrow money, as well as for those who have a couple of extra hundred dollars that they are willing to lend.

Peer-to-peer lending platforms can offer individuals an easy way to increase their funds, without having to wait for too long.

Peer-to-peer lending platforms explained

Peer-to-peer lending platforms are essentially websites that help borrowers and lenders connect. The companies that own them act as neutral third-parties that get a commission from every transaction and are only concerned with ensuring that everyone respects their agreements.

The money is offered and borrowed by users of the platform. Borrowers who are usually small companies or individuals will create a website account, add the personal and financial data that the platform requires them to submit, and then specify what amount of money they are looking to borrow. All this information is entered in a database that can be accessed only by the lenders (individual investors) who are free to look through the listings until they find a loan request that they find appealing.

Lenders can either offer borrowers the entire amount of money that they asked for or only a fraction. They will earn interest depending on the amount of money that they loaned.

An increasingly larger number of individuals is using B2B lending platforms in favor of traditional banking services due to the fact that these websites require less paperwork, they process requests and transactions faster, and they offer competitive interest rates.

The large number of borrowers makes it easy to divide your funds between multiple loans, as a safety precaution. These online loans, especially short-term ones are not secured and do come with certain risks.

How to start investing in P2P lending as fast as possible?

There are hundreds of P2P lending platforms and, although all of them treat their investors well, some are better with their borrowers than others. The direct result of this is the fact that some websites will only have a few thousand users while others will have millions.

  • Find a platform that EVERYONE likes

The first step towards investing in P2P lending is to do a bit of research and find a platform that everyone likes. Try to put yourself in the borrower’s shoes and look for a platform that offers a lot of transparency and has great reviews. Websites like TrustPilot will provide valuable information in terms of a platform’s popularity among borrowers.

You will also have to look at the terms of conditions that the platform offers investors. Pay attention to the minimum initial investment that is required to create an account. Most platforms require investors to deposit at least $25-$30.

Once you create an account, you will be able to offer loans. Borrower applications will contain the interest rate (calculated by the platform), the purpose of the loan, the term (anywhere between 30 days to 5 years), and a risk assessment.

  • Start offering loans to make money

When you find a loan request that you’re interested in payday loans from adherents.com, you will be able to offer part of the money or all of it. It is important to keep in mind that the transaction will only go through once the entire loan has been financed. If you only offer a portion of the money, the borrower will not pay interest until other lenders come and finish financing it.

If you are worried about the risks associated with certain profiles, you can either skip them completely or spread your funds between as many borrowers as possible. This will ensure that if an individual is unable to pay back the money, you won’t lose everything that you’ve invested.

Once the borrower starts making payments, which consist of interest and principal, each lender that has contributed to financing the loan will get the money that they have invested plus profit. This having been said, it is important to keep in mind that the platform charges a small fee to both lenders and borrowers.

  • Automate the transactions and let the platform work for you

As time goes by and you keep investing money in the platform, it will become increasingly harder to keep track of every loan that you finance or contribute to. Take advantage of the automation functions that p2p lending websites offer and let the platform select the loans to invest money in. You will have to input your preferences in terms of what risk mark and the interest rate you prefer, after which the website will automatically invest the amount of money that you set in the type of loans that you choose.

A Short Guide to Understanding What Types of Personal Loans You Can Access

Although loans are not necessarily harder to get, the fact that there are now more types than ever can be confusing. Both banks, as well as online platforms, are increasing their services portfolio in order to offer as much flexibility as their customers need. Unfortunately, this business move also makes it more difficult to make an informed decision. In this article, we will take a look at what are the main types of personal loans that you can take out, and explain how they work so that you can determine which one suits you best.

Here are the types of personal loans that you can access:

  • Unsecured personal loans

This is one of the most common types of personal loans encountered, mainly due to the fact that they are not backed by collateral. While this does take the risk away from the client and puts it on the shoulders of the lenders, it does come with higher annual percentage rates, making it slightly more expensive in the long run.

It is also important to keep in mind that in order to be eligible for an unsecured personal loan you have to have a good credit score. The rates that you get for the loan are also dependent on the score and can be as high as 36%.

  • Secured personal loans

Secured loans have lower rates, however, they need to be backed by collateral such as your vehicle or home. Both mortgages and car loans are part of this category of financing.

While secured loans do need to be backed up by your property, which the lenders can seize if you cannot repay the money, it does have lower rates, making them the better option if you have a stable source of income.

  • Fixed-rate loans

When it comes to all types of personal loans, most banks offer fixed rates. This means that your rate and installments will not change from one month to another. These are usually the most useful when the economy is expected to go through dramatic changes and you want to ensure that you will have to make consistent payments each month.

  • Variable-rate loans

Here, interest rates depend on specific benchmarks set by each bank. The amount of interest that you will have to pay on a monthly basis will depend on how that benchmark changes. These usually carry lower APRs than other types of loans and can even work to your advantage if you are able to predict how the economy will change.

  • Debt consolidation loans

Debt consolidation loans are only useful if you have multiple loans and do not want to pay each of them separately. Some banks offer these in order to simplify the debt payment process and also to help clients save on interest. This having been said, for a debt consolidation loan to be truly useful, it must have a lower APR than the rates on the existing debts.

  • Co-sign loans

A co-sign loan is a loan in which another person agrees to repay the money if the borrower is unable to. These are usually used by individuals who have low credit scores or no credit history at all. They can have fixer or variable rates and the eligibility conditions differ from one bank to another.

As a word of advice, getting a co-signer who has a strong credit score can help lower the rates of the loan.

  • A personal line of credit

Personal lines of credit are identical to the commercial ones. You open an account that contains a set amount of money. Depending on how much of that money you use on a monthly basis, without repaying it by the end of the month, you will have to pay interest. In other words, you only pay for what you borrow, regardless of how much money is put at your disposal.

  • Online lending services

These are hundreds of online platforms that allow individuals to borrow money for varying amounts of time. The main advantage with these is the fact that the evaluation process is streamlined and in some cases, you may be able to get the money in under 24 hours. Furthermore, these services rarely perform credit score checks.

However, most services will place limits on how much money you can borrow and for how long, which means that they are useful only in particular scenarios where you do not need a big loan.

Conclusion

These are the main types of loans that you can get from banks or online services. Please keep in mind that while these are somewhat standardized, every bank and online platform will have different terms and conditions. In some cases, you may be able to get lower rates or get some types of loans even if you have bad credit.