With as much as 14% interest rates on its records, peer to peer lending definitely offers a high return rate for anyone who has what it takes to invest. If you’re tired of what very little traditional banks have been promising you, then this is definitely the alternative investment solution for you.
Most of the high end earners, however, are netting an average of 5 to 10% returns (already taking into account charges, taxes, etc.). Some will earn a little less than that, and while it’s definitely still a lot compared to the typical 1% interest rate in banks, everybody wants to know how exactly they can get to the top of the class.
Much like any other investment, the best way to keep getting the best returns from peer to peer lending is treating your capital well. Knowing how and where to put your money makes all the difference in how much you get out of it.
Let’s take a quick look at a rough plan list of the seasoned peer to peer lenders:
1. Diversification. Anyone looking for good ways to make the most of peer to peer lending has definitely come across this term. It refers to spreading your investments apart so that returns are not only guaranteed but losses are minimized as well. Studies have shown that more often than not, investors who diversify to around 200 notes don’t really feel or experience too many losses, and this is because in P2P lending, there are naturally more paybacks than defaults.
2. Keeping your Cash Active. The more you keep your money invested, the more returns you get. Therefore, you’ll want to make sure that all the money you get from paybacks are invested immediately. There are many ways to do this, either manually or automated, but the idea is to keep it all rolling.
3. Adding Risks. There are high rated borrowers and then there are low rated ones. The general rule in peer to peer lending is that you get higher interest rates from investing in low rated borrowers as an incentive to undertaking a higher risk. True enough, those who take higher risks do enjoy higher returns in any business, including this.
4. Know your IRA. Eventually you’ll want to get out of the taxes and fees, which is what the Independent Retirement Account is for. This is normally considered by those who’ve been doing well so far and would like to trust the system, but it’s you who decides exactly when that time is.
5. Filters. Peer to peer lending allows investors a lot of freedom, especially when choosing who they invest with. Filters help you keep those choices constant by exposing you to the kind of people you prefer lending to.
6. Secondary Markets. This one’s for more liquidity. Sometimes we need to sell our loans because there are signs that they might not work out well (especially when they extend way beyond the grace period). The trick to learning when is a whole different story, but you need to know that this IS an option.
There are so many other strategies that could maximize your peer to peer lending output, but the ones mentioned above will help you get on top.
Do you want to learn more about how peer-to-peer lending from MoneyEgg can significantly boost your personal finance? Then visit MoneyEgg here – http://www.moneyegg.com
Are you ready to increase your personal fortune with tax free peer to peer lending using MoneyEgg? If so, tell us your comments or P2P questions below and we will respond with our expert peer-to-peer financial advice.