Here I Will Post About My Investments for FIRE
I invest in many assets in order to FIRE, however my favorite kind are Peer to Peer lending investments so my first post will be about that :-)
Please bear with me, I'm new at this.
What Is Peer to Peer Financing
With rates of interest on savings accounts and cash ISA's striving to overpower the cost of living, many people are looking at putting their cash in to more dangerous investment opportunities which provide an improved rate of return.
Peer to Peer financing is just like investing with a banking institution, but pays higher rates. However unlike a conventional bank account, it is possible to lose capital.
P-2-P lending platforms match savers, who are prepared to lend, with debtors - either people or small enterprises.
By simply removing the middle man rather than having the overheads of regular banks, Peer 2 Peer sites can often give you more favourable rates, whether you're a loan provider or a customer who may have struggled to get a personal financial loan someplace else.
You invest through a website, but lenders work in different ways. Some allow you to choose who to lend to, while others spread your investment out on your behalf.
Applicants will be credit-checked by a credit reference bureau, and also have to pass a Peer 2 Peer website's very own credit-worthiness tests in order to be eligible for a financial loan. Several lenders enable you to select the credit-worthiness of the borrower - choosing a riskier individual most often leads to greater interest rates.
The websites also look after getting money from debtors.
Here is a short video about Peer to Peer lending
Is Peer to Peer lending safe?
By being linked right to a person who wants to borrow, one of the most immediate dangers for your money is if a customer fails to repay what you've lent them (generally known as 'defaulting').
Websites handle this danger in different ways. Ratesetter, for instance, splits your investment in to £20 chunks, so it is distributed across several personal loans. This helps spread risk, as well as means that if one borrower fails to repay, the entire investment doesn't take a hit.
Zopa and RateSetter provide compensation funds which will automatically cover a person in case a debtor defaults.
Nonetheless, these types of reimbursement funds are certainly not infinite. It's quite likely that within a economic crash where plenty of consumers default concurrently, they might run out of funds, though it hasn't occurred to date.
Indeed, Zopa's more modern products are not protected by their compensation fund.
Funding Circle takes a different strategy: there's no reimbursement account, but there are increased returns available.
Most significantly, P2P websites aren't covered by the Financial Services Compensation Scheme which guarantees your capital with banks and building societies up to the value of £85,000.
I hope that all made sense (and I hope everything on the page works for you).
Next post will be about my main portfolio of mixed assets.