{"id":7054,"date":"2024-12-04T17:44:00","date_gmt":"2024-12-04T15:44:00","guid":{"rendered":"https:\/\/moneyhub.ee\/?p=7054"},"modified":"2025-04-22T13:45:15","modified_gmt":"2025-04-22T11:45:15","slug":"p2p-investing","status":"publish","type":"post","link":"https:\/\/moneyhub.ee\/en\/useful\/articles\/p2p-investing\/","title":{"rendered":"11 tips to know before starting P2P investing"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7054\" class=\"elementor elementor-7054\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-6431d228 e-flex e-con-boxed e-con e-parent\" data-id=\"6431d228\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-58dacdab elementor-widget elementor-widget-shortcode\" data-id=\"58dacdab\" data-element_type=\"widget\" data-e-type=\"widget\" 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data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">11 tips to know before starting P2P investing<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-29f955d e-flex e-con-boxed e-con e-parent\" data-id=\"29f955d\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-763651ea elementor-widget elementor-widget-image\" data-id=\"763651ea\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img fetchpriority=\"high\" decoding=\"async\" width=\"2240\" height=\"1260\" src=\"https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4.png\" class=\"attachment-full size-full wp-image-7056\" alt=\"tips to know before starting P2P investing\" srcset=\"https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4.png 2240w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-300x169.png 300w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-1024x576.png 1024w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-768x432.png 768w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-1536x864.png 1536w\" sizes=\"(max-width: 2240px) 100vw, 2240px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-df5caad e-flex e-con-boxed e-con e-parent\" data-id=\"df5caad\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-1b005776 elementor-widget elementor-widget-heading\" data-id=\"1b005776\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Before starting P2P investing, consider these 11 smart tips for minimising your risk and gaining higher returns using a P2P platform.<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4ace23c elementor-widget elementor-widget-text-editor\" data-id=\"4ace23c\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Investors in peer-to-peer <a href=\"https:\/\/moneyhub.ee\/money\/loans\/\">loans<\/a> boast about getting double-digit returns on their peer-to-peer lending: 10%, 11%, and even <\/span><a href=\"https:\/\/www.monestro.com\/en\/home\/index#aboutP2PLending\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">20% on some platforms.<\/span><\/a><span style=\"font-weight: 400;\">\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">But of course, there are risks. This guide is written for those wishing to begin investing in loans.<\/span><\/p><p><b>Post summary:<\/b><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>What is P2P investing?<\/b><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>11 smart tips for P2P investing<\/b><\/li><\/ul><h2><span style=\"font-weight: 400;\">What is P2P investing?<\/span><\/h2><p><span style=\"font-weight: 400;\">Peer-to-peer lending has seen high-yield-seeking investors flocking to the market as years of unpredictable stock market returns and low savings rates.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Peer-to-peer lending is where investors make unsecured personal loans to consumers. In return, they are rewarded with average annual returns ranging from 9 to 20%, depending on the platform they use.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">However, P2P lending is risky and contains risks to the original capital.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Peer-to-peer is a financial transaction without the use of a bank.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Like <a href=\"https:\/\/moneyhub.ee\/bank-accounts\/\">banking<\/a>, peer-to-peer lending offers loans to consumers and businesses with the interest derived from the loans paid out to investors, yet has cut out the bank as the &#8216;middleman.&#8217;\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Rather than deposit savings into a bank that uses the funds as loans to their customers. Peer-to-peer lending and investing is depositing your money into a P2P platform instead. The platform is then used to offer your funds to consumers as loans.<\/span><\/p><p><span style=\"font-weight: 400;\">Usually (although there are other ways to crowdfund), P2P lending is when borrowers apply through peer-to-peer lending websites and complete a loan application stating the following:\u00a0<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the loan amount\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the purpose of the loan<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">general credit evaluation of themselves<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">This information is then made available to prospective investors, who decide which loans to invest.<\/span><\/p><p><span style=\"font-weight: 400;\">Investor interest in peer-to-peer lending has rapidly grown. By 2050 the market is expected to be worth <\/span><a href=\"https:\/\/www.statista.com\/statistics\/325902\/global-p2p-lending\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">one trillion US dollars!<\/span><\/a><span style=\"font-weight: 400;\">\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">It&#8217;s easy to see why savings accounts offer zero interest in customer funds. Peer-to-peer investing provides high-yield alternatives.<\/span><\/p><p><span style=\"font-weight: 400;\">However, with anything offering a higher yield, more risks are involved in your investment.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">How can you minimise the risk to your capital when investing in P2P loans?<\/span><\/p><h2><span style=\"font-weight: 400;\">11 smart tips for P2P investing<\/span><\/h2><h3><span style=\"font-weight: 400;\">1# Prepare yourself to accept some risk<\/span><\/h3><p><span style=\"font-weight: 400;\">The P2P investment market is young, and because of this, it is highly volatile.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Volatility, although it contains some risk, also means there is an opportunity for growth. Even if investors begin by depositing a low amount, they must acknowledge that it has some element of risk, and your capital could be at a potential loss.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">The default risk is the borrower not paying back the money lent if they struggle financially. Most of the risk is minimised under Buyback guarantees and the Guarantee Fund.<\/span><\/p><p><span style=\"font-weight: 400;\">If you do not want to have any risk to your capital investment, then investing in peer-to-peer loans is not for you. You have to accept there is some risk if you seek high returns.<\/span><\/p><h3><span style=\"font-weight: 400;\">2# Comparing P2P platforms<\/span><\/h3><p><span style=\"font-weight: 400;\">Before you begin investing in peer-to-peer loans, you must select a platform to deposit your funds into and determine which projects to invest in.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Some platforms are more specialists in individual loan types, while others:\u00a0<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">pay higher returns\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">have introductory bonuses\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">have BuyBack guarantees and more innovative investing software to make investing easier.<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">You will also want to know how to withdraw funds and whether there are any fees. What are the project default rates or early exit penalties?<\/span><\/p><p><span style=\"font-weight: 400;\">You need to check all the questions before deciding on a platform.<\/span><\/p><p><span style=\"font-weight: 400;\">Ensure you use platforms with a track record and have operated for at least three years or more. It is useful to gauge past platform projects&#8217; performance to gauge their success.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Naturally, past performance offers no guarantee about future yields. However, platforms that have operated for several years mean they have obtained market experience, historically demonstrated returns,<\/span><span style=\"font-weight: 400;\"> and <\/span><span style=\"font-weight: 400;\">are unlikely to be<a href=\"https:\/\/moneyhub.ee\/news\/scamming-update\/\"> scam companies<\/a>. They will also likely have reviews written about them.<\/span><\/p><h3><span style=\"font-weight: 400;\">3# Do your homework on any P2P scams<\/span><\/h3><p><span style=\"font-weight: 400;\">With all financial transactions and lending, there are risks. Sadly, peer-to-peer lending has seen a spike in fraudulent attempts to dupe investors and consumers out of their money.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">A P2P lending scam typically occurs when a platform begins to block investors from withdrawing their funds and closes the site.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Whether the P2P platform was created to defraud investors or closed due to mismanagement and a lack of liquidity is often unknown.<\/span><\/p><h3><span style=\"font-weight: 400;\">4# Know about P2P loan types<\/span><\/h3><p><span style=\"font-weight: 400;\">The three main loan types are consumer, business, and property (real estate).\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Business loan lending may have a personal guarantee from the business director(s), making investing more attractive. Property loans are secured on the property, making them more secure, while consumer loans are lent to individuals and are often unsecured.<\/span><\/p><p><span style=\"font-weight: 400;\">Investing in all loan types is best to ensure that your risk is spread out. Also, check the payment history of individual loans, including the data held about the borrower. Knowledge is key to obtaining a higher yield if the borrower is trustworthy.\u00a0<\/span><\/p><h3><span style=\"font-weight: 400;\">5# Understand and use secondary markets<\/span><\/h3><p><span style=\"font-weight: 400;\">Secondary markets are marketplaces on platforms like ours where investors can buy and sell their investments if they wish to exit them.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">If an investor wishes to exit a loan before the withdrawal date is permitted, they can place their share of the loan on sale, and others can buy it or part of it through the platform.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Examine the loan&#8217;s payment history before buying it through the secondary market. Ensure it does not have any arrears or is due to mature soon.<\/span><\/p><p><span style=\"font-weight: 400;\">Secondary market loans are a superb way to diversify your portfolio &#8211; you freely choose which amount to buy, thus minimising your portfolio risk.<\/span><\/p><p><span style=\"font-weight: 400;\">Not all platforms have secondary market features, and some have limitations.<\/span><\/p><h3><span style=\"font-weight: 400;\">6# Diversify your portfolio<\/span><\/h3><p><span style=\"font-weight: 400;\">Diversification of your portfolio is a fundamental basis for any financial investing.<\/span><\/p><p><span style=\"font-weight: 400;\">Investing low amounts in varying projects is always a sound strategy instead of &#8220;putting all your eggs in one basket.&#8221;<\/span><\/p><p><span style=\"font-weight: 400;\">A diversified P2P portfolio should include a variety of investment projects, for instance, bonds and stocks. If your investment portfolio is secured by real estate, the risk to your capital is even further reduced.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Secured loans tend to have lower default rates, and the loan recovery process is much smoother than unsecured loans.\u00a0<\/span><\/p><h3><span style=\"font-weight: 400;\">7# Use the AutoInvest feature<\/span><\/h3><p><span style=\"font-weight: 400;\">To maximise their investing rewards, investors should monitor their P2P accounts and keep the cash held in them to a minimum.<\/span><\/p><p><span style=\"font-weight: 400;\">One way to keep cash off the account is to use the AutoIvest feature, which is excellent for decreasing the time needed to keep your investments ticking along.<\/span><\/p><p><span style=\"font-weight: 400;\">AutoInvest works well when all the loan types and projects are similar, ensuring volatility levels remain uniform.<\/span><\/p><p><span style=\"font-weight: 400;\">A platform with variable loan types with low and high-risk projects means AutoInvest should be switched off and the projects managed manually.<\/span><\/p><h3><span style=\"font-weight: 400;\">8# Decide between investing in secured\/unsecured loans<\/span><\/h3><p><span style=\"font-weight: 400;\">Consumer loans are mostly unsecured, making them riskier to invest your money in.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Business loans offer either none or some form of security, meaning some reassurance should the loan default, the capital can be repaid. Some business loans come with personal director guarantees.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Property and real estate loans usually offer a first or second charge on the property as security, making them less risky.<\/span><\/p><p><span style=\"font-weight: 400;\">Usually, it is preferable to have some form of security offered. However, even with property provided as security, there is still a risk that a loan could default. Plus, if the property fails to sell at a price high enough to be sufficient for the full recovery of the loan&#8217;s principal.<\/span><\/p><h3><span style=\"font-weight: 400;\">9# Invest in different markets<\/span><\/h3><p><span style=\"font-weight: 400;\">A solid strategy for investing in P2P lending is searching for opportunities in other countries. This is made easier if you use P2P software, which makes both quicker and more straightforward.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Investing in various European markets is a solid strategy to diversify and build a robust portfolio. Plus, loans outside your country could bring higher return rates if the markets are newer.<\/span><\/p><h3><span style=\"font-weight: 400;\">10# Use platforms that have a BuyBack guarantee<\/span><\/h3><p><span style=\"font-weight: 400;\">A BuyBack guarantee is an agreement, usually a legal contract, between the loan originator and a lender to protect them against a borrower defaulting on the loans.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">BuyBack guarantees activate if a borrower misses payments for a particular number of days. If this occurs, the loan originator must wholly or partly buy back the loan.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Buyback guarantees compensate lenders for the remaining principal and some of the interest and penalty fees.<\/span><\/p><p><span style=\"font-weight: 400;\">A buyback guarantee does not eliminate risk; it merely minimises it.<\/span><\/p><h3><span style=\"font-weight: 400;\">11# Start slow, very slow<\/span><\/h3><p><span style=\"font-weight: 400;\">As with all new financial ventures, newbies should begin slowly as they learn about P2P investing.<\/span><\/p><p><span style=\"font-weight: 400;\">Start with smaller amounts, learn where it is easier to make returns and then incrementally increase your deposits. It is even better to reinvest your returns from existing projects into new ones to avoid depositing more funds.<\/span><\/p><p><span style=\"font-weight: 400;\">Only when you are confident, then can you accelerate your investing. But for now, begin slowly.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Before starting P2P investing, consider these 11 smart tips for minimising your risk and gaining higher returns using a P2P platform.<\/p>\n","protected":false},"author":3,"featured_media":7056,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-7054","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles"],"acf":[],"blog_post_layout_featured_media_urls":{"thumbnail":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-150x150.png",150,150,true],"full":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4.png",2240,1260,false]},"categories_names":{"21":{"name":"Articles","link":"https:\/\/moneyhub.ee\/en\/category\/useful\/articles\/"}},"tags_names":[],"comments_number":"0","rttpg_featured_image_url":{"full":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4.png",2240,1260,false],"landscape":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4.png",2240,1260,false],"portraits":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4.png",2240,1260,false],"thumbnail":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-150x150.png",150,150,true],"medium":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-300x169.png",300,169,true],"large":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-1024x576.png",800,450,true],"1536x1536":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4-1536x864.png",1536,864,true],"2048x2048":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-4.png",2048,1152,false]},"rttpg_author":{"display_name":"David Bailey","author_link":"https:\/\/moneyhub.ee\/en\/author\/davidbailey\/"},"rttpg_comment":0,"rttpg_category":"<a href=\"https:\/\/moneyhub.ee\/en\/category\/useful\/articles\/\" rel=\"category tag\">Articles<\/a>","rttpg_excerpt":"Before starting P2P investing, consider these 11 smart tips for minimising your risk and gaining higher returns using a P2P platform.","_links":{"self":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts\/7054","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/comments?post=7054"}],"version-history":[{"count":0,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts\/7054\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/media\/7056"}],"wp:attachment":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/media?parent=7054"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/categories?post=7054"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/tags?post=7054"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}