Peer-to-Peer lending is a great way to make your money work for you. Basically, you lend money to others and in return you get interested.<\/strong> You do this via third-party platforms. If you want to get started with Peer-to-Peer lending, or crowdlending, some questions might arise. How to start with Peer-to-Peer lending<\/strong>? <\/p>\n What can I expect? What returns will I get? How passive is it?<\/p>\n I had these questions myself when I started with Peer-to-Peer lending. That\u2019s why I wrote this article to help you find an answer to those questions and kickstart your way to Peer-to-Peer lending<\/a>.<\/p>\n As with anything, we will start with the end in mind. We will start by checking how to include this P2P lending into your current financial goals. After that, we will discuss how to actually start P2P lending. Then we will go more into how we can make this income stream passive.\u00a0<\/p>\n Let\u2019s dive straight into how to start with Peer-to-Peer lending<\/strong>!<\/p>\n The first step is to <\/a>set your goals<\/a><\/strong>. As with any financial decision that you\u2019re making, start with the end in mind. My goals consist mostly of three things: how much I will invest in this, what is my income goal for this investment, and what percentage of your portfolio this will be.\u00a0<\/p>\n How much do you want to invest in this? <\/strong>After you\u2019ve invested the initial investment amount, getting money into your Peer-to-Peer investments regularly will get the compounding machine going. It\u2019s easiest to allocate a percentage of your monthly income to Peer-to-Peer lending.<\/p>\n What is your income goal? How much money do you want to get from your<\/strong> Peer-to-Peer investments? This can be a moving target. You can express this in yearly or monthly amounts and when your goal is reached you can redefine it. Most P2P lending platforms make around a 10% annual return. My goal is 100 euros a month in passive income<\/a>, meaning I will need to invest around 12.000 euros in Peer-to-Peer lending.\u00a0<\/p>\n What percentage of your portfolio is allocated to P2P lending? <\/strong>I know I write a lot about Peer-to-Peer lending. However, I don\u2019t recommend investing all your money into P2P lending. It\u2019s generally not a good idea to put all your eggs in one basket. A general rule of thumb is to have around 10% of your portfolio in P2P lending. I would say spend the other 90% of low-cost index funds <\/a><\/strong>\u2013 my favorite! Besides that, it is good to have an emergency fund <\/a><\/strong>with 3-6 months of living expenses.<\/p>\n After you\u2019ve determined what your goals are and how much money you will invest in Peer-to-Peer lending, you can select your first lending platform. It\u2019s hard to make recommendations that are suited for everyone, as regulations make some platforms only accessible for residents of those countries. For example Lending Club in the United States.\u00a0<\/p>\n I would say go for a platform that you\u2019re comfortable with and that\u2019s widely known<\/strong>. Important as well is to select a platform where you can diversify your investment between a lot of loans or a platform where they offer a buyback guarantee when loans default.\u00a0<\/p>\n As a European investor in Peer-to-Peer loans, I highly recommend Mintos<\/a> for starting<\/strong> (unfortunately not for US citizens). This is the platform where most of my Peer-to-Peer money is invested.\u00a0<\/p>\n If you want more details about Mintos, you read my full Mintos review here<\/a>. When you sign up using my link<\/a>, you get a bonus of <\/strong> 0.5% of your invested amount in the first 90 days!<\/strong> <\/p>\n Try Mintos Now<\/span><\/a><\/p>\n After you\u2019ve selected a P2P lending platform, you can start investing with your first loan! You will need to transfer some money<\/a>, which is possible by SEPA (Europe) or ACH (United States). The money is often available in less than one day!<\/p>\n Once you have the money in your account, you can actually invest in your first loan. You can check which types of loans are available and see what settings you want to have. <\/p>\n As a new investor, I would recommend investing the minimal required amount in any given loan<\/strong>. Usually, that would be around 10 euros. That way you can diversify your investment and minimize your risk in any given platform.\u00a0<\/p>\n Now that you\u2019ve invested in your first loan, let\u2019s spice things up! As you know, I\u2019m all about automating and paying yourself first<\/a><\/strong>. It is so convenient to set it and forget it, without having to invest the money manually into different loans.\u00a0<\/p>\n At some point, you will have payments coming back into your account every day. You don\u2019t want to check your investments daily to reinvest your gains and manually choose new loans. Let\u2019s automatically reinvest your returns!<\/p>\n To automatically reinvest your returns, you can use the auto-investing feature that many platforms offer. <\/strong>They are mostly called \u2018Autoinvest\u2019 and will enable you to set your own settings \u2013 when there is any loan available that fits your criteria, the platform will invest in that.\u00a0<\/p>\n It is important to know how to set up the auto-investing feature. Otherwise, it would be hard to know how to set up reinvesting your returns on a continuous basis. When you\u2019re starting put the automated investment amount to the minimum possible amount \u2013 often 10 euros per loan. Once your automation functions are all set up, you can enjoy passive income from Peer-to-Peer lending!<\/p>\n When you\u2019re all set up and you\u2019ve automated your Peer-to-Peer investments, it\u2019s important to check your investments regularly. This will not directly give you a return on your money, but monitoring the performance of your investment is important.\u00a0<\/p>\n If you notice that your strategy is not working, you can adjust at the earliest possible opportunity. <\/strong>If you have a low return on your investment because not all your money is invested or there are a lot of late payments, you can check why that is the case.\u00a0<\/p>\n Personally, I check my P2P lending accounts once per month when I\u2019m writing my monthly report<\/strong>. Most of the platforms you\u2019re investing in will tell you your current return on investment per year. If you notice that your returns are lower than the platforms\u2019 average, it will be good to go back to step #4 and adjust your auto-investing strategy.<\/p>\n Monitoring your progress and checking your investments will show you if you\u2019ve reached the goals we set at the beginning. If you\u2019ve met all your goals, you can set new goals and go to the next level with your Peer-to-Peer investments.\u00a0<\/p>\n Now you\u2019ve got your first Peer-to-Peer investments going, you can repeat the process. Again and again. This will grow your investments over time, especially when the compounding machine will start doing its job.\u00a0<\/p>\n Diversify your investments when you\u2019re investing in a platform. Diversify your investments even further and invest in several platforms. You can even diversify and invest in different currencies!<\/p>\n When you follow these steps, you will have a great passive income-generating machine that will start compounding over time. <\/p>\n To step up your game and move more money into your compounding machine, it\u2019s important to save money<\/a>. There are many ways to save money<\/a>, like not eating out often, not having a TV<\/a>, living in a small apartment, driving a cheap car, and more. <\/p>\n If you\u2019re having issues saving money, it might be a good thing to make a budget<\/a>. Budgeting can be extremely helpful if you can stick to it<\/a>. I mean, saving money doesn\u2019t have to be boring<\/a>!<\/p>\n The more you save, the more you can invest<\/a>. The more you can invest, the more you will fast track your way to financial independence<\/a>.<\/p>\n To recap, the steps to start with Peer-to-Peer lending<\/strong> are:<\/p>\n1. Start With The End In Mind<\/span><\/h2>\n
2. Select A P2P Lending Platform<\/span><\/h2>\n
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\n<\/figcaption><\/figure>\n3. Invest Your First Money<\/span><\/h2>\n
4. Automate Your Investments<\/span><\/h2>\n
5. Check Your Investments Monthly<\/span><\/h2>\n
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\n<\/figcaption><\/figure>\n6. Repeat Until Financially Independent<\/span><\/h2>\n
Summary \u2013 How To Start With Peer-To-Peer Lending<\/span><\/h2>\n
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