Blog Getting started 5 Signs that P2P lending should be in your portfolio

5 Signs that P2P lending should be in your portfolio

date June 8, 2021 time 3 min read 63 views

5 Signs You’re Ready to Get Started with P2P Lending


Peer-to-peer (P2P) lending has disrupted the banking industry and has made getting a loan easier than ever before. In fact, over the last decade, this industry has presented both investors and borrowers with an alternative to banks. Through the use of P2P lending platforms which facilitate online borrowing transactions, there’s no need to wait for banks to approve loans, or deal with high bank interest rates. Globally, P2P lending was already valued at $3.5 billion back in 2013. And given the market’s growth today, experts predict that this number will rise to $1 trillion by 2025.

In short, P2P lending can definitely be a lucrative investment idea. And if you feel like you’re ready to invest in P2P lending, here are some signs you should check.

Sign 1: You’ve done the research on P2P lending and how it works.

Knowing the basic mechanics of P2P lending is a good sign that you’re on the right track, especially if you want to start investing. Today, there are two types of P2P lending: traditional and crypto-backed. All you need to start traditional P2P lending are a bank account and a platform for lending out money to borrowers. You deposit your funds to the platform online, check it for loans that match your interest rate and default risk, and then fund the loan to start earning interest.

On the other hand, crypto-backed lending is a form of collateral-backed lending. While banks take things like cars, houses, and other assets as collateral for loans, this type of lending requires borrowers to put up cryptocurrency as collateral. Crypto-backed lending works similarly to traditional P2P lending, except that they’re lower-risk. For investors, its main disadvantage is that you can’t charge high interest rates. At the same time, it also requires a lot less risk assessment as loans are backed up by a strong asset. And this can be very helpful if it’s your first time investing in loans.

Sign 2: You’ve settled your personal finances.

Another good sign that you’re ready to start is if your personal finances are settled. This means that you’re up-to-date on any bills or payments that you’re responsible for. Credit card interest rates can be extortionately high which could make any investments less valuable since your gains would be going to cover more debt. If you’re in debt, consider consolidating it with a single loan from the bank, or consult a financial planner. 

Sign 3: You’ve outlined your goals for this investment.

Outlining your short and long-term financial goals such as paying off debts, planning for retirement, or earning a passive income can help in choosing the right investment strategies. Your goals will determine how much money you need to spend, how much interest you can earn, and your timeline for earning certain amounts.

You can also leverage the flexibility of the P2P lending market to more quickly achieve or even adjust your goals. If you need to pull out of an investment early, you can sell the rights to earning from the interest on a loan on a secondary market. You can also buy the rights to other loans, which will allow you to earn without having to invest and finance the loan throughout the entire term. Even loans with fixed-term investment periods can be bought and sold on a P2P lending secondary market. 

Sign 4: You’re aware of the risks.

As with any investment, P2P lending comes with risks. But you can minimize these risks by sticking to crypto-backed lending. In fact, some lending platforms (such as MyConstant) require borrowers to put up to 200% of the loan in cryptocurrency as collateral. This means that even if those borrowers default, you won’t lose a cent. You can even invest any earned cryptocurrency in interest-earning crypto wallets. In short, investing in crypto-backed P2P lending is a lot less risky than investing in the stock market or real estate.

Sign 5: You’ve found a platform you trust.

If you’re positive on all these signs, the last piece of the puzzle is finding your preferred P2P platform. Ideally, it should be one that’s compatible with a wide variety of online banking platforms. It should also allow you to earn a reasonable amount of interest from lending out your cash. You also need a P2P platform with flexible features that can be aligned with your goals. 

MyConstant is a crypto-backed lending platform that can give you all this with very little risk involved. We allow  you to lend either USD or cryptocurrency to borrowers around the world – at an interest rate of 9%. And because all loans are backed by cryptocurrency, MyConstant’s default rate is extremely low. In fact, no investor has lost a penny since the platform launched in 2019. If you choose the right platform, P2P lending can be a lucrative way to make some cash.

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Written by Alicia Mitchell

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Trevor Kraus

Trevor Kraus

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