Peer to peer lending is often considered riskier than other forms of investment. Looking at peer to peer lending sites like Lending Club, they state the risk of investment is at your own risk and if you are not able to loss your money don’t invest. This is stated on their prospectus with the SEC and this represents the worse case scenario for investors. This admission is often enough to scare the majority of people away. So why is peer to peer lending so risky and if it so risky why are people still lending?
The overall risk is based in the nature of the loan issued. It is unsecured. Meaning, it has no real collateral backing the loan as in an auto loan or mortgage. There is only a promise to pay the loan by the borrower. This is not the only type unsecured loan today. Every credit card and store credit is an unsecured loan. These loans or lines of credit carry a high rate of interest due to the fact they are unsecured. The same is in true of peer to peer lending.
How is peer to peer lending different than a credit card? There time period to pay off the loan or maturity. Loans are usually over a three year period. The borrower pays installments and not minimums. The goal is to completely pay off the loan by the term.
So how risky are the loans? They often carry the same risk that credit cards and other types of unsecured debt. The risk is always present of non payment or late payment, but many steps are taken by lending institutions to reduce this risk.
First, the qualifications for borrowers are clearly stated and include a credit check. The institution reviews the credit history, utilization, credit score and several other factors as well as employment to assign the borrower’s loan a grade. If a person does not meet loan standards they are rejected. These are often posted for investors to review. This provides reassurance that the institution is doing its job. Second, the pertinent information from the background and credit check is posted with the loan request. Lenders are allowed to review this information and make their own decision as to whether to invest or not. Third, lenders are not required to invest in just one loan. Lenders can take their capital and spread it out among several loans. This has the effect of diversification and helps to further reduce risk to the lender.
So why are people investing in peer to peer loans? The returns are high. A site like lending club list a return in the range of 6% to 19% depending on the loan funded. This is an extremely high rate of return and is far better than other investments. Secondly, the default rate is low. Lending club is currently listing defaults of 120 plus around 2%.
The risk is always present, but the right steps need to be taken to avoid them. Find a reputable site for peer to peer lending. They make sure the proper background checks are performed and reject the borrowers that are too high of a risk. A lender should diversify their holdings of loans to further reduce their exposure to risk. For most lenders, the returns out weigh the risk and make it a feasible investment.
Archive for June, 2010
Peer to Peer Lending: Discretionary Investing
June 29th, 2010Tutorial: Read A Google Finance Stock Quote
June 28th, 2010
This is a beginner oriented tutorial on how to find and read a Google Finance stock quote
How Investment Property Can Help you Retire
June 28th, 2010A lot of Americans aren’t going to have enough money to retire on. That is just a un happy reality of these times. Instead of bemoaning that reality (and the unfairness of it all) the best thing someone who hopes to have a healthy retirement can do is simply make sure they aren’t the typical American. We must take actions to assure they will have enough income to enjoy their life and pay their bills, as well as those increasing medical bills.
The best way to avoid becoming one of these Americans who end up working at some remedial job through their so-called Golden Years, according to Robert Kiyosoki, author of the “Rich Dad Poor Dad” book series, is to buy investment property.
Investing in real estate is a wonderful way for people to prepare for retirement because it supplies a great benefit called “passive income”. After someone has laid the ground work, passive income keeps coming in without a lot of effort. A laborer gets compensated only for the hours he puts in. A real estate investor, after setting up his system, gets paid for keeping it running. And keeping it running, if he been wise about it, will involve paying his team to do the job of inspecting them every now and then.
A great thing about passive income (such as from investments) is, the more time the real estate investor holds them, the more ROI they should make for her, with less and less work on the investor’s part. It’s the closest thing to the “Holy Grail” of the world of money.
It sounds attractive, but we shouldn’t just take the plunge. And even though it is completely learnable, there’s quite a bit to learn when one is thinking about buying investment property – things like comprehending P&L statements and real estate law. The biggest concept to learn, however, is one’s own limitations. The individual who understands where to find the knowledge he wants is far better off than the individual who remembers tons of facts and formulas around in her memory.
In the book “Cash Flow Quadrant,” Robert Kiyosaki advises potential investors to increase their cashflow in addition to their knowledge. He writes of developing a business system that can be set up and left alone, freeing the investor to move to the next step instead of investing all her time working in her business. The next step involves continuing the real estate education and start to look around for specialists to employ and investment properties to buy.
Robert Kiyosaki also talks about this change as transitioning from one part of the cash-flow-quadrant to the next. He emphasizes that, the 1st step someone needs to take toward transforming her life is altering the thinking process. If someone adjusts the way he/she processes the thought of money, then he/she will wind up in a better position to change his relationship with it.
The way someone thinks determines the actions they take throughout the day, and those actions determine their success. The primary benefit of reading books like Robert Kiyosaki’s “Rich Dad, Poor Dad” series – brings you closer to new ways of thinking about stuff. When investors see how easy it is to develop new skills and acquire better knowledge, they are virtually unstoppable.
Business people for June. 27
June 28th, 2010Business people for June. 27
Business people in the news.
M25 Commercial Property Lettings Market Goes Against Norm
June 27th, 2010Despite the continuous decline in the UK economic climate the M25 office market enjoyed an increase in commercial property lettings for the last quarter of 2008, according to Knight Frank’s latest report. Commercial properties lettings increased by 10% in the third quarter for the M25 region and 9% in the M3 corridor. However, the M4 market experienced a decline in their final quarter, and was 13% down from their previous quarter’s figures.The credit crunch has effectively turned the commercial property lettings business into a buyer led market, therefore this upturn is a welcome surprise for commercial property owners in the M25 region. Availability and supply of commercial property offices within these areas has decreased over the last six years therefore landlords are not experiencing the same pressures as other commercial property owners who are operating in these increasingly buyer led markets. There are still areas within the M25 region where oversupply is prominent however, and towns such as Bracknell where availability of retail commercial property is high are likely to experience the same downturns and economic pressures as the rest of the UKLandlords throughout the UK are having to provide increasing incentives, inducements and discounted rental rates in order to survive the current downturn in commercial property sales. Things are unlikely to improve over the next year and a half and the economic situation is likely to put further pressure on landlords and commercial property owners with tenants likely to see further offers available to them over this time period. Overall throughout the UK the office take-up market has declined with areas such as Bristol seeing new commercial property lettings figures fall to below their five year average. The London areas worst affected by the office lettings downturn are those where businesses operating within the financial services and hedge fund industries are especially prominent. The high profitability of these two sectors over recent years meant that lettings were more location than rent led, with businesses happy to pay over the odds for the right location. However, the increasing pressures that these industry areas are now experiencing means that many offices in prominent financial areas throughout London are being left either vacant or commercial property landlords have provided decreased rent rates and further incentives in order to keep their buildings occupancy rates up.
Which degree is better for me to land a 6/5 figure career finance degree or business management?
June 27th, 2010I’m going to a community college right now but will transfer to a 4 yr college soon. I want to land a great job when I get out. I want to make 6 to 5 figures in a year and I know being in business will do it. But I want to have the right business degree so I can land that kind of job. I want to be able to know what kind of degree will do that. Business Finance or Business Management? Please help I would like to know before I transfer to a 4 yr college. Thanks and please serious answers.
To TC, I know 5 comes before 6, I just set high goals for myself but thanks for the answer.
Car Finance Secured or Unsecured?
June 26th, 2010Ever wondered what the difference is between secured car loans and personal unsecured car loans and how that difference affects your finance and their repayments. The car loans terms can be only minor, but is larger when the true cost of each is taken into account.Before discussing secured and unsecured car loans in more detail, let’s first have a look at the various workings that determine the cost of your loan and of your monthly repayments. The cost of the car finance package is the total you repay less the loan amount borrowed. Hence, let’s say you are repaying $20,000 at 12% interest rate over 36 months; you will repay at the rate of $664.29 per month. That would total a repayment of $23,914.44, and the cost of the loan would be $3,914.44 plus any set-up or administration fees. A car finance calculator will enable you to work this out for yourself.An substitute to a car finance would be car hire purchase (HP), where you hire the car over the repayment period and get the title to the motor car with your final payment. Until then the car belongs to the HP company.However, most finances are either secured or unsecured, and not all finance companies offer unsecured or personal loans so let’s look at secured car finance first. Secured car loans is one whereby the lender offers the loan with the car as security. If you fail to make payments, the lender can sell the car to recoup their money. It is possible to get a secured car loan when the motor vehicle gets past a certain age, often 7 years, but the car finance term or loan term may be requested to be shorter than the standard 5 yearsor not at all by using your home or some other form of security. These however are not strictly classed as a car loan. normally the car is used as security over the loan.If you prefer you can request no deposit car finance and have all on-road costs added to the amount financed. Options like registration , loan protection insurance for disability,death or unemploymentand comprehensive auto insurance as part of the financing deal. Loan insurance makes sure that the loan is paid off in the event of your death during the loan period, and comprehensive car insurance is needed to make sure that the car is in good condition should it be needed to repay the finance in the event of you having your car repossessed.This might look hard , but these are standard conditions for any secured loan, not only car loans. Secured car loans terms are from 1-7years, and the interest rate will be lower than that for an unsecured car finance where the financier charges extra to compensate for their added risk. As with any loan, a deposit will result in lower payments, or a shorter term, whichever you prefer. Balloon payments could be an option on your finance package, which is like a deposit in reverse, payable at the end of the period. This is popular by those whose income will increase over the period, and they will be in a better financial position to pay a lump sum in 3 – 5 years time. This too results in either a lower monthly repayment or a shorter repayment term.If you are buying a used motor vehicle, your car loans intererst rates can be priced very differentlyaccording to the finance company and the age of your car. Many will charge higher loan rates, and the current credit crisis has changed the outlook of many lenders to unsecured car loans in particular. Many no longer offer unsecured car finance due to the increased risk in the current economic climate.However, they are still available, and some car loan brokers can ensure you get the best unsecured car loan available. In addition to the interest rate on such loans, you should also evaluate the fees charged, since they can involve a considerable outlay for you before you get the loan.The key differences between secured and unsecured car finance, therefore, can be summed up as:Secured car finance are cheaper to repay, with normally lower rates.You need to have full comprehensive car insurance with all secured car loans, while unsecured financing does not.Both loans could require deathinsurance cover for the finance, but secured car finance packages are more likely to.You can sometimes include comprehensive insurance, registration and other costs in the secured loan, but with an unsecured car loan you must include the the costs on top of the amount borrowed.Fees for unsecured car loans can be significantly higher than for secured car loans. Not all finance companies will offer unsecured auto loans.There few doubts that if your vehicle is young enough to be given a loan with the car as colateral, then that should be your option. You might be able to arrange a secured loan for an older vehicle with your residential home as security, but you will have to make sure to maintain the payments since lenders are becoming unsympathetic in the current economic crissis.
How To Make Money In Real Estate Syndicates.
June 26th, 2010The Real Estate Syndicate, In Its Present Form, Is A New Investment Medium, Not Too Well Understood By The General Public. Potential Investors Receive A Lot Of Promotional Literature, But Are Not Told What To Look For. This Book Lays It All Out.
How To Make Money In Real Estate Syndicates.
Tips for Purchasing French Investment Property
June 23rd, 2010Don’t rush into buying properties for sale in France. You need to decide
which area(s) of France you want to buy in, then concentrate on finding the right French property investment. Property organisation, nvillas can help you with the
process of buying a property for sale in France. Some tips are set out below to
help you:
U.S. Money Financing Afghan Warlords for Convoy Protection, Report Says
June 22nd, 2010U.S. Money Financing Afghan Warlords for Convoy Protection, Report Says
A Congressional investigation also found that the money given often amounts to little more than mafia-style protection payments.
