Four Reasons To Consider Investing In Consumer Loans
March 23, 2020 (Investorideas.com Newswire) Perhaps you're a keen investor who is ready to expand your investment portfolio with a lower-risk investment offering impressive returns? Or maybe you're brand new to the investment market but have been considering testing the waters for the first time? If you're looking for a new and interesting way to invest and make healthy profits, the consumer loan investment market could be for you.
You may never have thought of investing in consumer loans, and indeed, you may never have even heard of the possibility of P2P lending. However, it's something that has increased over recent years and it represents an interesting prospect for those who are ready to invest in something a little different.
What Does Investment In Consumer Loans Mean?
Consumer loans are money that is lent to individuals for family, household or personal purposes. Some people seek out consumer loans to renovate their homes, buy furniture or appliances or because they're looking for the best consolidation loans to simplify their budget and reduce their monthly payments. Consumer loans represent a lucrative asset for banks and now, thanks to P2P lending, investors like you can invest in them too.
P2P platforms provide investors with lists of people needing loans. Investors then choose the right loan for them and offer finance to the borrower. They will then begin repaying the loan together with interest and the investor will continue to receive payments month after month until finally the loan has been repaid.
1. Consumer Loan Investment Beats Savings Accounts
At the moment, if you put your money in a savings account the average amount of interest you'll receive is just 0.09%. Even the best online banks can only offer around 1.5% annual interest. To make matters worse, the inflation rate is higher than the amount of interest you'll receive. It currently stands at 2.3%. So, effectively, if you keep your money in the bank you'll be losing money. Consumer loans offer a much higher rate of interest, often up to around 15%.
2. There's No Need For Much Capital Or Knowledge To Start Investing
Investing is often intimidating due to the amount of capital and knowledge required. To be a successful trader on the stock market you have to invest a lot of time and effort first in learning as much as possible about assets and market trends before you even place your first trade. Investment in consumer loans, in contrast, is more accessible and simple. The application process is relatively speedy, you can begin with a much lower amount of capital, and there are even auto-invest tools that do the hard work on your behalf. With all of this in mind, consumer loan investment represents an excellent opportunity for even inexperienced investors to dip their toes into the investment markets.
3. A Relatively Low Risk
There are many types of investment to choose from, but some are very high risk. For example, we all know that the stock market is notoriously volatile and this deters many people from ever executing a trade. Property, too, can be a risky investment as the real estate market often enters a slump leaving those who have invested in bricks and mortar out of pocket. As for investing in startups, it can just be seen as a form of gambling.
Of course, no type of investment is ever completely risk-free, but its very nature. However, consumer loan investment, when compared with the other options available, has a relatively low risk as long as you spread out your money over several loans. Some P2P lending platforms even offer default guarantees for your protection. This makes it a relatively safe choice when you're weighing up the pros and cons of different investment types.
4. You're Helping Others As Well As Yourself
Not only does investment in consumer loans offer you benefits, but it also helps other people. Many people struggle to get loans from their banks or other lenders. They may be reliable, honest and hard-working, but mistakes in their past are preventing them from obtaining credit. Some people have never had credit at all and, therefore, find that they are unable to obtain a loan or credit card in the future when they need one most.
There are also more than 2 billion people around the world who don't have a bank account. Those people are at a distinct disadvantage when it comes to obtaining credit. They cannot get finance in the same way as other people. When they need to find a new source of money in an emergency they struggle to find any lender to help them out. You can help them though, by offering them the money they desperately need.
Investment in consumer loans could be a great solution for you if you're keen to add a reliable, lower-risk investment to your diverse portfolio and to create a new passive income stream. Whether you're new to the investment market or whether you're an experienced investor who is ready for a new and exciting opportunity, consumer loan investment could be just what you've been looking for.
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