Tom at Prosper Lending Review may have topped my compiled blogger advice for new lenders by posting advice from 11 people for someone considering peer lending. The person seeking advice is concerned about stock market returns and the low bond/CD rates and therefore is considering putting a 100K into P2P loans to earn 10%. To sum up my advice:
- Consider the fees — you can increase your returns in any investment by lowering the fees paid.
- Consider taxes — the income tax treatment of peer loans reduces your return plus the taxes can be difficult to file. The Roth IRA is a better investment than P2P loans if eligible.
- Consider the investment timeline — over the next 30 years stock returns might not be fantastic, but a few months of 30 years is not a good sample for long term evaluation.
- Consider starting peer to peer lending slowly. This was many bloggers mentioned initial mistakes in P2P lending.
- Consider the stats of the top ten lenders. In general, they are not receiving a 10% return and many are doing much worse.
The advice from several others also echoed my thoughts: 1) Invest for the long term 2) Consider fees 3) Peer-to-peer is too new to commit a large portion of an investment portfolio 4) start P2P lending small. See all the detailed advice at Prosper Lending Review.
lending advice, poll, p2p lending, investing