The majority of investors are turning to peer-to-peer lending strategies as an option to complement the more traditional investment firm in Australia vehicles they have grown accustomed to. As younger investors enter the market, they will naturally be drawn to opportunities that rely on current technology for their processes.
Peer-to-peer lending is an innovation that provides borrowers access to funds without utilizing a traditional bank or credit union but via an Internet platform.
P2P is a winning solution for both borrowers and investors. Borrowers typically try to steer clear of bank loans or, as in many cases, aren’t qualified. Instead, they consider peer-to-peer lending via an investment firm in Australia as a more effortless way to get funds. On the other hand, investors have discovered that peer-to-peer lending is a terrific way to diversify their portfolio and get optimum ROI.
How do you know if your Australian P2P lending platform is legitimate?
First off, you need to check if the platform operator is licensed. They must have an Australian financial services license or AFS. You can check them on the ASIC professional registers.
What are the advantages for investors?
Borrowers need the money, and despite the risks, investors have incredible advantages in the P2P lending system and some of which are:
- Higher Rates
It is well-known that nowadays, if you keep your money in a savings account, you will get no more than 1% yearly. If you want to earn a bit more, you should let your money stay untouched for a long period in a system such as a Time deposit. But with peer-to-peer, you can earn high returns for your money. Moreover, if you are the type of investor who doesn’t mind taking risks, it is even possible to make low double digits by funding borrowers who do not have optimal credit ratings.
- Everything Can Be Done Online
What makes P2P lending systems vastly different from other investment strategies is that everything occurs online. All the paperwork is done online, which includes investing and receiving the income payments.
Thus, you don’t need to deal with traffic or go to an office, nor will you be dialling a number to talk to an agent. You only need to sign up on the P2P platform of an investment firm in Australia and transfer funds to the account. You can choose from wide-ranging investments and wait for your monthly payments.
In Australia, the peer-to-peer lending system must be a managed fund. Check if the company is registered with the ASIC professional registers. It must be noted that an unregistered managed fund provides less protection compared to a registered fund.
- Diversification
When you invest in a P2P, the platform will provide you with notes. These are typically small amounts of an entire loan. Of course, some companies will allow you to fund an entire loan. But a majority of P2P investors will still prefer to invest in tiny slices.
The incredible thing about this is you can find some platforms where you can assign the criteria for loans you want to fund. For example, you may wish to only fund higher grade loans with a lower risk of default. The platform will filter its offerings based on these preferences. Alternatively, you can go for lower grade loans that are riskier but offer higher interest rates.
- Passive Income
If you put your money on a certificate of deposit, you typically won’t receive any interest until the certificate’s maturity date. If you go with a bond, you will normally get your interest quarterly or even semiannually. It is not the case with P2P loans since you will be receiving your payments monthly.
It is a terrific option if you want an investment that provides you with a regular income.
However, there is one factor of the monthly income situation you need to take note of. The monthly payment that you will be receiving will include both interest and principal. Thus, the notes are considered self-liquidating.
It is safe to invest in the P2P platform in Australia. However, if you are unhappy with your company’s financial services, you can communicate with the platform operator and explain to them how you would like the problem to be resolved.
Suppose you and the operator cannot arrive at a mutual resolution. In that case, you can contact the Australian financial complaints Authority or AFCA to make a complaint and get a free independent dispute resolution.
P2P lending is an incredible investment opportunity that provides you with a regular monthly income. But it is crucial to examine how willing you are to take risks with your money. The higher the risk, the higher the ROI. P2P lending systems allow you to explore different investment opportunities depending on your individual preferences, including your risk capacity.
