If you do a quick search online, you’ll come up with more than a handful of peer-to-peer platforms vying for your business. They want you to invest in them so they can market to more borrowers. How do you know which platform is right for you?
Check out our tips below to choose the right P2P platforms.
Do your Background Research
There are peer-to-peer platforms that started in the early 2000s, long before P2P lending was a thing in the United States. These companies have since branched out in the US and offer investors and borrowers great benefits. But not all platforms are created equal.
You must do your background research. Know a company’s history.
- When did they start?
- How long have they been in the US?
- What types of loans do they fund?
- How do they screen applicants?
- How do they rate applicants?
Read Customer Reviews
The internet is a wealth of information today – use it to your advantage. Read reviews not just on the platform’s site itself (they may be biased), but also on third-party sites. Chances are that you’ll find reviewers that are more than happy to be honest about their experience, both good and bad.
Read reviews from both investors and borrowers. You should know how it works on both sides. Are borrowers happy with their experience? If not, there may be fewer borrowers than you desire, leaving you with cash drag.
Know What they Offer
Have an idea of what type of loans you want to invest in and find a platform that offers this type of loan. For example are you comfortable with debt consolidation loans, medical loans, or loans to fund a vacation? What risks do you want to take?
Also, think about the terms of repayment. Do you want a loan that takes 6 months, 1 year, 3, years, or 5 years for repayment? Remember, you must invest for the entire term unless there’s a secondary market. But even if there is a secondary market, there’s no guarantee you can sell the loan at any given time, it depends on the market.
Know How They Market
What type of borrowers does the platform attract? Is it like Upwork who caters to borrowers that may not have established credit, but that have exceptional educational or employment backgrounds? Is it a platform that caters to borrowers looking for short-term loans?
Platforms can cater to any type of borrower – you just have to know what you’re comfortable handling. Do you want to loan to borrowers that don’t have any credit or do you prefer borrowers with an established credit history?
Do your research and know what each platform offers. Don’t just assume any P2P platform is suitable. Understand the terms, what’s at risk, and what others think of the platform. Why reinvent the wheel when you can see what others have to say about the platform? Using your own research and the input of past users, you can limit your risks and find a viable platform.