Social Lending as an Investment
Many people are looking for new places to invest at the moment. With interest rates being so low on savings accounts, the stock market being unreliable and the buy to let market outsupplying demand, many people are turning to other means to get a better return for their money.
One way of getting a better return is social lending. This is where an individual loans money to another individual, using a social lending company as an intermediary. It can be a good way of getting a better return on money than placing it in a bank.
|Of course, there are risk with this type of loan. If the person cannot afford to pay it back, then there is a risk that t he money will be lost. However, there is always a risk of losing money in any sort of investment, so it is a case of lowering the risk. In this type of lending, the lender can look at the financial standing of the person they are lending to. They can check their credit rating and then decide if they want to lend to them or not. This is the same way that a bank would assess the risk of lending to a person and should be a good way of making sure that the person will pay back the loan.
Obviously the plan is not fool proof. You can never predict if a person might be made unemployed and then not have the income to pay back the loan. But then there is this risk with any investment, where you do not know if the financial institution will go out of business or perhaps the stock market might crash. It is just a case of looking at the risk and deciding whether it is one you want to take on.