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Want to Invest in P2P Lending? Pay Attention To These P2P Lending Investment Tips
As an investor, you must understand well these various risks from the start, even before investing. Investments will be profitable if you can understand and manage the stakes in the right way. So what are these P2P Lending investment tips?
1. What is Peer to Peer Lending
Peer to Peer Lending is an investment that offers attractive returns and can be done quickly and cheaply on a cross-border basis in the international market. My experience is that peer-to-peer investing on the global platform Mintos provides 10 - 12% a year in Euros with a minimum investment starting from 10 Euros. Want to try? Diversification is one of the keys to successful investing.
Peer to Peer Lending is a direct investment process between fund owners and borrowers. What needs to be emphasized is the word 'direct.' Without intermediaries. Because with direct meetings, with the help of technology, the fund owner can get optimal benefits, no intermediary fees or commissions are cut. In contrast, the borrower of funds can apply for a loan process more efficiently.
2. Reasons for Choosing International P2P
One of the tips for choosing International P2P is to choose International P2P. You may ask, why should it be on an international platform?
Diversification into international markets broadens the spread of risk so that risk management is more optimal.
According to international economics studied, You must carry out diversification at the international level to share risks between countries and reduce the risk of domestic economic shocks.
We all know that there is a risk of foreign exchange rates (forex) with a weak currency against another.
Investing in a particular currency, in this case, the Euro provides diversification for the domestic currency's possible weakening.
Of course, there is also the opposite risk that the domestic currency strengthens against the Euros. However, looking at the past few years, the Euro's value trend is relatively stable against other currencies.
The relatively low inflation factor in foreign exchange, for example, the Euro, makes the real return on investment higher than investment in the domestic currency. Although it offers a higher nominal return but with a higher inflation rate, it makes real profits lower.
Inflation reflects purchasing power. If high inflation means that purchasing power will decrease, the opposite applies the same.
As investors, we must see how much actual profit is obtained by reducing the nominal return with the inflation rate. That could be one of the tips for choosing P2P Lending.
3. Tips for Choosing P2P Lending
3.1. Pay attention to the protection fund.
The first tip in choosing P2P Lending is to pay attention to protection funds. Although it does not guarantee the Deposit Insurance Corporation (LPS), this P2P investment has its guarantees, and you must pay attention to this. Not all some P2P Lending companies do provide protection funds for their investors.
This fund will be a substitute reserve fund for investors if, at any time, the borrower does not pay on time according to the agreement. This fund can also be a replacement fund for investor capital if bad credit occurs or the borrower does not return the money.
3.2. Benefit from Loan Interest
The P2P loan that you invest in will give you an advantage. You will receive the value according to the agreement with the borrower. You will receive this income in cash and is usually calculated based on the agreed interest percentage.
2.3. Can be diversified
Tips for choosing the subsequent P2P Lending, you can diversify your investment. In practice, the company will send you profiles of prospective borrowers who need funds. This will give you the freedom to choose and examine the prospective borrower's various considerations as best as possible. You will be free to choose the borrower that you will fund, including determining the value of the investment to be made.
3.4. Fairly High Risk
Although the potential returns from this investment are high, the risks are just as high. There is always the possibility of late payments or even default conditions on the funds you lend. This means that this investment may not benefit you; in fact, your capital may disappear.
So that's the tips for choosing P2P Lending for you. Hopefully, you can make a lot of profit.