What are actually the important questions you should ask before making a P2P investment? This article is not so much about the technical details of p2p loans, but about the questions you should ask yourself before investing. They concern your financial situation and your mindset because investing in p2p loans is not for everyone.
In this article, we want to highlight some of the most fundamental investing rules when you consider investing in P2P loans. Furthermore, we want to mention platforms for P2P loans that can be suitable for beginners such as Mintos, Bondora, and others. For more in-depth information, if Mintos is advisable for you, you should take a look at this Mintos Review.
What is my investment strategy?
Investing in p2p loans should fit sensibly into your overall investment strategy. A good strategy will spread the risks wisely across multiple asset classes and shape them according to your goals.
Even before such a strategy can be developed, an ACTUAL analysis should be made, outlining your current financial situation. Based on this analysis, the short-, medium- and long-term goals can be formulated and from these the investment strategy can then be created. The investment strategy should state how the assets are to be divided into the various risk classes.
Such an investment strategy helps to ensure that financial decisions are made systematically rather than on the basis of gut instinct. This is particularly useful in the case of high-risk forms of investment, such as p2p loans, but also when the friendly advisor next door is standing at the door trying to sell you a new contract.
You can find more information on the process of analysing and creating a concept in the article series “Organize your finances”.
What is my limit?
From your investment strategy, there is a direct limit for high-risk investments, which includes p2p loans. My limit is a maximum of 10% of my assets, and I am usually well below that. Some may argue that you give up a lot of return, but you still have to be able to sleep with your investment. So set your limit so that you are still reassured and could do without this money if necessary.
This is also almost the most important point about p2p loans: only put in money that you could also do without in an emergency. Also, you should never take out a loan for a P2P investment.
Speaking of morals – what else can I stand for?
Morality is an aspect of investing in p2p loans that is usually given little to no light. From an investor’s perspective, you might only see the platforms and maybe the numbers of the loans. But behind every loan, at least consumer loans, there is a human fate.
So, I think you cannot completely ignore the moral component. So, some people decide that they are not going to invest in consumer loans, they’re only going to invest in loans to businesses. Ultimately, you have to work it out with yourself what you can still justify.
Which is the right platform for me?
In the meantime, there are a variety of different platforms, all of which have their own special features. For beginners, suitable platforms can be Mintos and Bondora. They offer a good user interface and do not cause any problems with taxation. With Mintos, first experiences can be gained with a well-adjusted auto investment and the secondary market.
A somewhat smaller, but still interesting platform is Peerberry.
For the beginning, I recommend concentrating on two, maximum three, platforms. This is enough to gain first experiences and to get familiar with the matter.
Investing in p2p loans is not for everyone. The risk is high and it is not easy to keep track of the different platforms. Nevertheless, it is worthwhile to get to grips with the matter and take the first steps. p2p loans are still a good addition to the classic forms of investment.