After each project has been published on the website and from that moment, investors can check all available projects, their characteristics and the profitability they can achieve. In general, higher returns imply greater risks of default, taking less risk means earning less money. Thus, to reduce the risk of default, it is normal to divide your investment among the loans of several people, that is, to diversify the investment risks as much as possible. This reduces the risk for you, as the investor, that the client does not pay you, as you do not fully finance the credit of a single person.
What else should you know before investing?
As with any other investment, it is important that you have as much information as possible. Data of the borrower or the legal name in the case of a company, its balance and economic situation, a detailed description of the use of the requested money, as well as other criteria that follow the platforms to establish the corresponding solvency ratios in each case .
Making an investment in P2P
You must follow the same rules that you would use to invest in other instruments. That is, to maximize the investment risks, evaluate the profitability, risk and time horizon that best suits your personal circumstances and, if possible, also request guarantees from the borrower in order to compensate for the risk of default. . In some cases, you can also choose the loan repayment form. It is always convenient to choose that method that offers to recover the capital as soon as possible. Remember that the longer you will be without receiving the corresponding share of capital, the greater risk you will assume.
In conclusion, investing in loans between individuals involves taking certain risks. However, these risks will not be greater than the risks of investing in other instruments or investment funds. As in the case of any other investment, it is appropriate to apply common sense and consider the risk you want to assume due to the possible profitability and the existing guarantees.