As you may already know, P2P lending or peer to peer lending is the mechanism which brings together borrowers who need cheaper unsecured loans and investors seeking high return on their investments. P2P lending platforms offer great investment opportunities.
Even though through P2P investments you can earn fairly high rate of returns, some people have earned very low returns or even lost money. Prevention is always better than cure.
And why not improve your investment opportunities along the way?
Here are five ways by which you can improve your P2P investments:
One of the many ways to ensure higher rate of returns is to split your initial investment into a number of smaller p2p loans. That way, even if one of the loans defaults, you can still earn from your other investments.
Choose your Borrowers Carefully:
Even though it might seem daunting to go through the details of hundreds of borrowers, you should remember that negligence has never paid off.
If, on the other hand, you look at the details of every borrower individually and choose your borrowers carefully, you can earn better returns than what you would have earned otherwise.
Don’t be in a Hurry to Invest all your Money:
Patience pays off. Investing is a marathon, not a sprint. If you have followed the above step, you will be having a small number of borrowers now that seem worthwhile.
Depending on the money you are willing to invest, a small amount should be set aside for each loan. Keep repeating this process until all your money is invested. This process might be a bit time consuming and it might be weeks until you have all your money invested, but it’s totally worth it.
By the end of it, you will be having a high performing loan portfolio.
Go for long term loans:
Long term loans help you earn 2-3% higher returns than short term loans. Yes, long term loans have higher chances of default. And that’s why you need to focus more on step two above. When you choose your borrowers carefully, half your work is already done. And that 2-3% extra returns becomes worth the extra risk.
Reinvest your earnings:
Once you have invested all your money, you will be receiving interest regularly besides the principal amount. Reinvest those earnings to roll your money and increase it, just as a snowball gets bigger in size when rolled over snow.
These things will enable you to become a better investor and help you take full advantage of the investment opportunities in P2P lending platforms. Many investors get into P2P lending in the hope of high returns, and these things above will definitely help you get it.
Above five things are the keys to become a successful P2P investor earning above average returns.