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Exploring the P2P funding platform as your new business venture

Jul 24, 2020

Photo c/o 2019 Money Observer

Do you have a few thousand pesos to spare? Don’t let them lie around and become stagnant. As cliché as it may sound, there are proven ways to let your money work for you without having to exert too much effort. One of the simplest ways to do is to utilize P2P lending business and make it your own.

Why should you do so? According to a forecast report by Statista, the value of global P2P lending will reach a whopping one trillion dollars by 2025. This just shows how the international market is appreciating the value of crowdfunding and the wonders it can bring to both the borrower and the lender.

Does this sound good enough for you? If so, lend us a few minutes of your time and get a quick run-through on how you can start working with a P2P site and make the most of the alternative lending opportunity.

What is P2P lending?

Peer-to-peer (P2P) lending is method wherein people can acquire loans straight from other people without having to go through a financial institution. Basically, it can be considered as a social network where lenders and borrows meet to reach their financial goals.      It utilizes P2P sites or platforms that governs over the transactions, seeing to it that borrowers get their money at a reasonable rate and lenders enjoy a profitable return on their investment.

How do P2P investments work?

To begin P2P lending, you need to select a P2P platform. This website will serve as the venue where you will deposit the money that you will lend and where you will see the selection of loans that you can fund. Every P2P lending platform comes with their own set of requirements and rates for each of their transactions.

Also, these platforms set specific qualification in order to measure the investment risks and credit worthiness of each loan applicant and the ability to provide of each lender.

In terms of investing, you can start by opening a lender account with the platform of your choice. Then, you should arrange to deposit your initial investment, which will serve as the amount you will disperse into one or more loans. On the other side of it, a prospecting loan applicant will also create their own profile where they will provide all vital information that will show that they can settle their loan on time. Their profile also dictates how much their interest rates would be.

Depending on the platform, investors might be provided the opportunity to bid on the loans they’re interested in or they might be linked by the P2P site to their match. Then, once a borrower and a lender has been linked, the money transfer will be handled by the P2P platform. They will also facilitate the payment of the investor’s profit – depending on the settings of the site.

Photo c/o ipopba | Getty Images

4 reasons to invest in P2P loan platforms

  1. Lower entry investment requirement – Hearing the word “investment” brings the mind into thinking about having to shell out hundreds of thousands of pesos. It gives off the thought of shelling out tons of money to reap a large amount as well. P2P lending is changing this image of the financial lending world. For as little as 5,000 pesos, you can begin your journey of lending and begin earning interests that you can use to build your portfolio.
  2. Huge passive income potential – When you look at various ways to thrive in your financials, it is crucial that you seek a venue that allows you to get passive income. This means accumulating money without having to pay too much attention and work for it quite long.
  3. Option to diversify your portfolio – Investments come with risks – but, if you try out the best P2P platforms, you will be able to limit the risks through spreading out your investment in funding multiple loans and loan types.
  4. Better rates, better returns – Do you have savings account in a bank? If you look at it, your account will earn interest per annum, usually 0.25%. Is that a good rate? Well, if you have 100,000 saved, you will earn 250 pesos. A little underwhelming, isn’t it? You should look at P2P investment instead. Assuming a 10% interest rate on the funds you lend, your 100,000 pesos will give you an additional 10,000 pesos at the end of the term.

Some niches you can help with peer to peer funding

  1. Businesses – More and more people are leaning towards embracing their entrepreneurial self, especially in this trying times. Whether it involves establishing a franchise or selling their own products and services, a considerable amount of capital is required to launch their project. No matter the type and industry the business would operate on, P2P lending sites will help these business-minded individuals to experience the jumpstart that they need.
  2. Real estate – If you’re thinking about the hottest niche that will allow you to thrive in a lending platform, peer to peer real estate lending is attracting lenders and borrowers everywhere. Compared to equity investing, P2P lending come with lesser risks for investors, which makes it a more exciting venture to pursue.
  3. Automotive financing – Another niche that can be helped by peer-to-peer loans is car loans. There are many borrowers that are in immediate need of cash to get a car, whether they will do it via bank financing or through leasing. There are P2P sites that provide a focus on being the method to link people closer to their dream car.
  4. Education – One of the top industries that require funding and financing is research, scientific, or educational institutions. A P2P business can give people in these fields to acquire funds to get their degree or start out a research project.

What should you do to reach success in a P2P lending business?

P2P lending is proving itself to be one of the most viable ways to make your money grow in 2020. Our advice if you want to start soon? Do your research. If this is something new for you, take your time to learn as much as you can about it and familiarize yourself with the system.

If you don’t know where to start, there’s no need to worry. The Blend PH team is here for you! As one of the strongest P2P platforms in the Philippines, our team of experts can clear the question marks clouding your mind. We can talk to you about everything related to P2P lending. Shoot us an email at [email protected] to learn more or visit our investors’ brief.