Peer to Peer Lending Investors
Returns on fixed-income investments have rarely been lower and stock market risk has rarely been higher.
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.
There is one new asset class that offers investors the relative safety of fixed-income but returns as high as stocks.
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 deposit 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.
The only difference is that peer lending allows you to invest directly in these loans, before the bank and the investor group has taken a cut of the profits.
My Experience P2P Investing
I've been p2p investing for over five years now and have averaged just under 10% return. Sure, it's not the 12% annual return stocks have been churning out…but do you really think stocks will keep exploding higher forever?
Anyone investing in the markets for more than a decade knows what happens to stocks when prices get too high.
Peer lending investing offers a solution to stock investors that need to produce higher returns and stable cash flows but can't park their money in bonds until the market cools.
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 Lending Club 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.
Right now, there's only one website I invest in loans – one of the few open to regular investors. Lending Club is the largest p2p investing site in the world and has the best tools for finding peer loans. You can invest as little as $25 in loans and the site offers an easy automated tool for stress-free investing.
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.
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.
I've moved most of my p2p investing articles over to my other blog, PeerFinance101, but you can still find some great peer lending resources here. 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.
One of the best ways to invest in peer loans is through a tax-advantaged IRA account, available on Lending Club. You get all the benefits and monthly cash flow but don't have to worry about taxes until retirement. You also get a deduction on your current income taxes – it's an opportunity you can't miss.