Peer to peer lending is a transaction in which one individual lends money to another, with the loan funding and servicing tasks being handled by an independent third party. Online peer to peer lending services have sprung up over the past several years, making this a popular alternative to a conventional bank loan. However, many people may wonder if the transaction is a safe one.

The answer is yes, it is safe for those who do their homework. This involves conducting some online research to ensure that the lending service is legitimate and has a long and successful history. Look for those who have several millions of dollars in issued loans. The most well-known lending services are mentioned in articles within financial magazines.

Loan default is likely the most major concern from the perspective of a lender. Individuals interested in lending money should look for services that boast a low default rate. The lowest rates of default usually characterize the most conservative (Grade A) loans. Some companies even boast no defaults in recent months.

Returns are another key factor that potential lenders should compare when reviewing lending services. Look for those that are higher than the current going interest rates for other investments, then narrow the list to those with the highest rates. It will be common to find returns of between eight and ten percent. Some even go as high as 13 percent, though these are increasingly difficult to find.

Peer to peer lending is a fixed income investment that makes a nice addition to the financial portfolio for many investors. However, for this to be a smart investment, the most reputable lending service must be selected. Investors should not let high returns outweigh high default rates when they are exploring the lending service in which to invest their hard-earned money.

Keep learning more:

1. P2P Lending: What Is Peer To Peer Lending?


2. P2P Statistics: P2P Lending Earns ~9% Per Year


3. How To Make Money Giving P2P Loans


4. How Credit Cards Are A 15%+ Anti-Investment


5. Why Paying Off Debt Is An Investment


6. How To Find The Best Saving Account Rates


7. Types of Mutual Fund Fees and Expenses

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