I’m a big believer in doing what you can to build sources of passive income. Like most good things in life, passive income isn’t very easy to obtain. It’s a wonderful thing once it’s established and you’re reaping the benefits. But generally, if you want to build a decent source of passive income, you need to invest time or money (or some combination of the two).
The least time consuming way to build passive income is by investing money. For example, some stocks pay dividends, bank accounts pay interest (although that’s close to non-existent in today’s low rate environment), and rental properties earn rental income.
All of these require you to risk your money.
As you might expect, the more risky the investment, the higher the potential return is (along with a greater chance for loss). As a potential investor, one of your goals is to find investments that have a worthwhile return, given the risk.
With all of this in mind, we turn our attention to peer-to-peer lending (also sometimes called “social lending”). In simple terms, this is when you lend money to another person, and that person repays you with interest.
Practically speaking, there are online platforms that allow borrowers to crowd source these funds. In other words, someone might need to borrow $10,000, but you only have the ability to invest in $25 of that loan. The nice part about these online platforms is that they help you remove some of the potential risk by evaluating the borrower (credit check, employment status, etc.) and giving you that information before you invest.
When selected correctly, many of these investments can provide a relatively high rate of return for a relatively low amount of risk. Personally, I’ve been a big proponent of investing through Lending Club (affiliate link). You can read about exactly how I invest with Lending Club here.
In today’s interview, we talk about peer-to-peer lending with one of the industry’s experts – Peter Renton. He discusses how he got started in the industry (with his blog, Lend Academy), what he thinks about the current peer-to-peer lending websites, and what he believes the future holds for this relatively new (and evolving) form of investing.
If you’re at all interested in this type of passive income, definitely check out the interview below!
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