With many peer-to-peer (now called marketplace lending) platforms available, how does one know where to invest? Consider the following:
Some platforms require investors to be accredited in order to invest. Know if you qualify.
Some investors are willing to take on risky investments with the possibility of high returns. Other are willing to forgo higher returns for much safer investment options. Know which platforms cater to your risk tolerance.
Comfortable with technology?
All peer to peer platforms are web-based, but some offer more cutting-edge technology than others. As new platforms arise, new features and technologies continue to progress. How comfortable are you with newer technologies?
Who sets the rate of return?
On most platforms, the rate of return is set by the platform itself. On one platform, the rate is set by the individual investors themselves through an auction model. Do you want to set your own returns, follow the platform's expert underwriters, or both?
Do transparency and social factors matter?
Most platforms provide investment grades and loan categories, but the borrowers are anonymized. Another approach provides more transparent information about the borrowers and allows borrowers to "pitch" directly to investors. Do you want to hear from the borrower directly? There are also platforms that provide for social "returns." Does social impact matter to you?
Ultimately, there are several great peer-to-peer marketplaces available. Explore them all, and find the ones that are right for you.
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