Invest in a Person and a Story
Delegate Your P2P Lending
Popular peer to peer lending blog Delegate Lending recently spoke with Brendan Ross on how to invest in P2P loans like a millionaire, as well as the issues that need to be overcome for P2P lending to thrive in Australia.
Below is an excerpt from the interview.
It seems that during the last boom and bust cycle we paid more attention to the warnings than the euphoria. It is like we have overdosed on caution, don’t you think?
Yes, I believe we have become overly cautious. I think there is a place for caution, but it’s important to realize there are good opportunities that are available. Some people will play it safe and lock their money away. For example, people who have been investors for a long time tend to be more conservative in their approach to investing. As I’ve said previously, I’d like to see people use the opportunities around them to allow them to expand into areas they might not be comfortable in normally.
I’d use caution, of course, but I’d also use my imagination to make it work. Some people use caution well when they’re approaching investing.
Would you suggest that we continue to take a cautious approach to investing in P2P loans?
Lending Club, Prosper and Third-Parties
There is a lot of confusion on the web about placing trust in loans made by third parties.
I do not see this as a problem, there are certainly benefits to using a third-party.
Any time you invest in P2P lending, you do so on the collective interest of the loans.
A lender can’t just default on a loan, because that borrower must pay it back in full.
Unless they are able to find a buyer for the loan (or they are able to write off the loan and just accept a partial payment).
Third-party debt collection is also not a problem, because the borrower is obligated to pay back the loan.
This is a lot of leg work that third-parties can help investors in P2P investing save time and money on.
Given that, your investments are not as vulnerable to situations that can arise when a borrower has a personal touch.
A sad incident is when a borrower has a mental or physical health episode and defaults on their payments.
Such an incident can be hard for investors to come to terms with, but is something which can happen.
This is another good point to point out, why pay high interest rates for unsecured loans?