The growth of the internet has simplified things. Today you can do practically anything from home as long as you have a smartphone or a PC and an internet connection. Among the areas in which the internet has transformed is banking. It is pretty much easier now to lend money and make passive income.
Traditional banks are not always keen to give people loans for such things as vacation or paying off a credit card. And to fill this gap, social lending has emerged.
P2P lending allows you to collect some passive income in the form of interest by lending out your surplus money.
In this post, we are going to walk you through 7 great P2P lending platforms to lend money online and make a passive income from the United States.
Method #1: LendingClub
Lending Club is one of the largest p2p lending platforms in the world, having overseen deals worth $50 billion (as of 2020) since it was launched in 2006. It was the first p2p lending platform in the United States and the first ever to peer-to-peer lending to register its offerings as securities and to offer its loan on a secondary market.
As a lender, you can use the Lending Club platform to experience higher returns compared to traditional fixed-income investments.
However, it is important to note that the platform is not available to all investors, and for those that can access it must meet certain income and net worth requirements.
For instance, you must have an annual income level of $70,000 or more to lend money online with the platform.
Once you have set up your account, you will be required to invest a minimum of $25 per not. The platform grade notes from A1, which is lower risk and a lower rate, to E5, highest risk, and the highest rate, with subgrades per rate.
Grades F and G have been removed from the platform due to high levels of defaults.
Method #2: Zopa
Zopa is the first-ever p2p lending platform and is based in the United Kingdom. The fact that it is still going strong ever since it was launched in 2005 shows that the platform offers another best way to lend money online and earn income.
The platform is available to residents of the United Kingdom, the United States, Italy, and Japan. Zopa is perhaps one of the most complicated p2p lending sites as it requires you to go through a credit union for you to buy a 12-month CD, after which you decide how much of that amount will to which borrower.
This platform offers smart investments in real people and generates returns of from 3.4% to 6.0% in mid- to long-term.
It also offers tax-free ISA investments for UK residents.
Method #3: Prosper
Prosper also offers one of the best methods of lending money online. The platform provides lenders with some of the highest interest rates on the market, ranging from 5% to 36% for a period of three to five years.
As a lender, you have many options to lend your money. The platform has seven risk categories that you can choose from, each with their estimated return as well as the level of risk.
The risk levels include the following:
- AA – 4.99 %
- A – 5.22 %
- B – 5.77 %
- C – 7.78 %
- D – 11.49 %
- E – 13.48 %
- HR (High Risk) – 11.74 %
The platform reported that almost 84% of active investors either met or exceeded their expected return on investment.
Method #4: Upstart
This p2p lending platform was founded by an ex-Google staff, who also created an intuitive software application for financial institutions and banks.
The platform has a very unique way of determining the risk of loans. While some lending site uses FICO score, Upstart has its own patented system that uses artificial intelligence and machine learning to access the risk of borrowers. Because of this, the platform has seen a massive reduction in loss rates compared to other p2p lending platforms. It also uses the TrustPilot rating in its risk assessment process.
Lending money online through Upstart is also intuitive. With this platform, you can also set up a self-directed IRA using your earnings from p2p lending. This feature is appealing to many lenders.
You can also set up automated investing in Upstart by choosing a specific strategy and depositing funds automatically. Most borrowers on this platform are college-educated with an average income of more than $83,000 and more than 77% of them are using the loan to pay off their credit card debts.
As an investor, this is a good thing as you want as much information about the person you wish to lend to as possible.
StreetShares allows investors to lend money online to help small businesses grow. This means that the borrowers are small businesses.
Investing in this platform is also different from other p2p lending sites, in that you can only invest in a Veteran Business Bond, which helps small business owners in the country. As a result, you can earn a fixed 5% on your investment, and you can deposit between $25 and $500,000.
After 12 months, you can withdraw your deposit with 5% earnings. But if you need your money sooner, you can withdraw after paying a 1% fee.
There is also an option to leave the money in your account to keep growing after one year.
Method #6: FundingCircle
FundingCircle is also another p2p lending site that focuses on loans for small businesses. The company was launched with the aim of helping small to medium businesses achieve their objectives by providing them with the necessary funds to grow.
For an investor, all you need is to deposit a minimum amount of $250’000. The money can only be loaned to small businesses in the United States, and not startups, which have an operating history, cash flow, as well as a strategic plan to grow.
Method #7: Peerform
Peerform was launched back in 2010 by Wall Street Executives who had backgrounds in both tech and finance.
Investors can select between two types of investment products namely Whole loans or fractional loans.
According to the platform, whole loans are designed for institutional investors whereas the fractional loans are suitable for individual investors.
Peerform has 16 different risk categories to invest in and uses an algorithm that constantly evolves as new loans are funded, to provide the best information for investors.