Peer to Peer Lending Investors
Returns on fixed-income investments have rarely been lower. Invest in supposedly risk-free government bonds with a five-year maturity and you’ll make nothing after inflation. Investments in loans to corporations are not doing much better with a five-year return of just 0.5% after inflation.
You might be able to get the 7% annual average return on stocks if you can avoid the next crash that cuts prices in half. That’s the best case scenario. The average investor earned just 2.6% annually over the ten-years to 2013 because of poor investing behaviors like panic-selling.
Investors everywhere are joining the peer lending revolution and investing in peer loans for returns that beat stocks and stable cash flows
In fact, you probably already have investments in peer loans and don’t even know it. Because government regulations have increased the cost of making loans, a lot of banks are using their money to invest in peer loans instead of originating loans themselves. Pension funds and mutual funds have been investing in peer loans for years to take advantage of stable cash flows and safety outside the stock market.
Investing in personal loans is nothing new. Banks have been selling their originated loans to investor groups for centuries. Those investor groups bundle the loans and sell them to pension funds, insurance companies and individual investors. Peer lending allows you to invest directly in these loans, before the bank and the investor group has taken a cut of the profits.
Investing directly in peer loans means savings for borrowers and higher returns for investors. Costs to run a bank branch location are 30% of expenses for a traditional bank. The ability to match borrowers and investors directly means a cost savings of up to 4% for the peer lending site, savings that are passed on to borrowers as lower rates.
Returns of 6% and higher are available on the safest peer loans with cash into your account every month. Average returns of 10% are easily achievable on portfolios of loans across risk categories. The average borrower on PersonalLoans has a credit score of 700 FICO and makes $74,000 a year. That’s a pretty solid borrower meaning you’re investing in someone that isn’t just going to walk away from their loan and destroy their credit.
You’re not alone in seeing the potential for high returns and cash flow in peer lending. Large institutional investors like Sequioa Capital and Francisco Partners are investing billions in the peer lending platforms to drive growth in the industry. Even internet giant Google is getting in on the game with a $125 million investment in 2013.
I have been analyzing stocks and bonds for more than a decade and have never seen an opportunity like this. Not only do investors have the opportunity to make stable and safe returns well above other asset classes by investing in peer loans, the democratization of lending could revolutionize America’s financial market.
Peer Loans Online is your first stop for information and analysis into the world of investing in peer loans.
Check out some of these previous posts on peer lending investing to get you started:
When you’re ready to get started investing in peer loans for returns that beat the stock market and stable cash flow, check out our Lending Club review for how to get started. Lending Club offers the best opportunity in peer loan investing with automated investing on criteria you set and tax-free investing in retirement accounts.