Make Money With Peer-Peer Lending
What the heck am I talking about?
Peer to peer lending is basically what the name says; you chuck a bunch of cash into an online account and then divvy it up amongst dozens of people looking for loans around the country. You lend say £25 to each person (you and a couple 1000 other people together give that person enough money for their loan).
This is basically the capitalist version of Kiva.org.
I’m not sure how I feel about this idea.
Sure you can get rates significantly higher than traditional bonds or CD's (especially in today’s low interest rate environment), but the mathematics of it all (I’m talking about default rates here), mean that you really run too high a risk unless you can spread your money over 100's of people.
i.e I think you need £5000 or more to really enjoy this and make good money consistently over the long term.
But even then you can’t be expecting to get anything more than a slight premium over industry wide bond rates for example. This is after all just a risk return equation in a fairly efficient financial market.
Also, there can be a lot of work involved if you are having to evaluate every person you loan to and when the amount your loaning is only £25 (i.e so you can diversify your risk) you better say hello to your new freaking job as a loans officer!
Oh and did I mention…you also need to be a bit of an economist in order to accurately assess the economic environment so you don’t end up lending out a ton of cash just before another recession hits and delinquencies spike (can anyone say negative R.O.I?!).
Our goal is to find multiple income streams, and the more passive the better.