If you haven’t saved any money yet this year, don’t worry - you’re not alone. Saving rates across Europe have dropped dramatically over the years, with the saving ratio falling to its lowest level on record last year.
However, even though it’s already December, it’s not too late to make a meaningful contribution to your 2020 savings. Of course, you should act quickly and smartly. If you’re looking for a better return than 1.5% - 2% and you’re happy to take on a little risk in pursuit of higher returns, it’s worth to put some money on P2P lending. We’ve written down 4 practical tips on how to do that the best.
Peer-to-peer lending in a nutshell
Before jumping into the tips, let’s quickly go over the phenomenon of P2P lending. The industry has developed astonishingly fast and is not just a hype (unlike Bitcoin in 2017). The reasons for lenders and borrowers to switch to P2P are logical and pragmatic, which is exactly why the market will keep growing.
In a nutshell, P2P lending turns you - the investor - into a loan provider. You lend money to someone who will repay you at a later date plus interest, usually 5-15%, depending on your tolerance of risk. Now, this doesn’t mean that you will be a “loan shark”. Instead, you simply register online through P2P lending platforms like Swaper.
These platforms connect investors with borrowers and function as mediums through which you browse investments, track performance and withdraw your earnings. Attractive return rates, a stream of steady income, and low barriers to entry are just a few benefits of putting your money into P2P lending. There’s a lot of talk however over building a long-term strategy for your investments, but what would be the essential steps to start seeing results also in a short time-span?
Tip 1: Auto-Invest Portfolio for passive income
The initial enthusiasm of P2P lending and the rates on offer mean that often people are happy to put a bit more manual effort into managing the investments. However, if you’re not careful and don’t have so much previous knowledge, you can end up spending several hours a week managing your investments or choosing individual loans. Depending on investment amount, this can become almost like a part-time job.
That’s why before jumping into investing it’s worth to examine the automated functions investment platforms offer. Good news is that many of them do, and once you’ve set up automated investments, P2P lending requires very little, or almost non-existing amount of your time.
With platforms like Swaper you simply set up your Auto-Invest Portfolio according to your preferred criteria and you let it work for you.
Tip 2: Invest in short-term loans
Investment options with P2P lending can be categorized into two - long-term and short-term loans. The motivation among investors to invest in short-term loans has surely increased over past years. One advantage of such investments (especially prior the holiday season) is that results can be gained in relatively short time-span. Short-term loans (usually between 1-5 months) are more liquid and reachable in the event you want your cash because as soon as you have invested in the loan, you start gaining accrued interest until the loan is mature.
Loan amounts for short-term loans are also typically smaller, thus you can quickly finance them and it’s far easier to diversify investments in your portfolio. As the minimum investment amount is just 10 EUR - any investor can contribute and earn great returns from day one.
Tip 3: Take advantage of secondary market
The secondary market is a quite undervalued feature of many P2P lending platforms. It’s where investors can place their investments for sale to other investors. Sometimes though, as said, the secondary market goes unnoticed for investors but actually, there are multiple benefits why the secondary market is the best place for increasing your short-term returns.
Platforms like Swaper have a built-in secondary market, where in just a few clicks you can select the loans and amounts you want to sell. Because of automated process and Auto-Invest Portfolio tool mentioned above, loans added on the secondary market are usually sold within minutes. This means that you can earn immediate return and liquidity when you need that the most.
Tip 4: Turn your experience into profit
If you’re passionate about P2P lending and happy with the platforms you invest with, a very logical step would be to share it with your friends and family as well. You will do that anyway, but what if you could earn some extra money from it?
Luckily, referral and affiliate programs allow you to do that. And what is great about it is that you don’t need a big website and you don’t have to be a famous Instagram celebrity to do it. Anyone with social media following or even a small blog can turn this into a few hundreds a month very quickly.
In P2P lending, this means simply joining an affiliate network, often through an external website where you can find hundreds of offers. In case of referral, it would mean you get your personal referral link that you can share with your network. Both options grant you a commission-based bonus which once again you can cash out as soon as you receive it.
Investing surely is a “long-term process” and largely based on things that have yet to happen. As much as it’s important to keep your long-term goals for the future in mind, we hope that these four practical tips help you to keep calm on this holiday season and motivate you to take first steps towards boosting your budget whether for these Christmas or the next one!
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