For those who are searching for ways to earn some extra money from the savings for their down payment,
one option may be to earn interest income from peer to peer lending investments such as
It is important to understand that while this type of investment is not free from risk, it may still be a very
What is peer to peer lending?
Peer to peer lenders are established by a group that is affiliated with a bank and offers loans to individuals
for nearly any purpose. Peer to peer lenders may invest as little as $25 while larger investments may be made
at pre-determined caps set by the investment group. Peer to peer lending may also be restricted in some states,
so it is important to determine if this is something you can participate in.
What peer to peer lending is used for
Borrowers use peer to peer lending for a variety of purposes. These may include basic things like
consolidation of consumer debt (e.g., credit cards) or obtaining financing for a small business venture.
There are various reasons why these loans sometimes work better than bank loans, typically because the
terms are more favorable in some cases.
While it is possible to invest as little as $25 in a single loan, it is better to have a diverse portfolio
of loans. Remember, your principal is at risk if the borrower fails to pay your loan back. If you invest as
little as $1,000 you may invest in several loans of $25 each which can minimize your risk and increase your
Benefits of peer to peer lending
While there is some risk involved in this type of investing, the return on investment is much higher
than with a savings account, certificate of deposit and many other investment types. These higher
returns can help you save even more money towards your home down payment. Additionally, as your money
is repaid, you can make new loans that can help increase the amount of money you have available to save
for your down payment.
Good option for down payment savings
Peer to peer investments can be a great way to increase your down payment savings. While there is some
risk involved, the return on your investment can be considerable, especially if you diversify your
lending portfolio. Even a modest investment portfolio using only $1,000 can return more than a high-yield
savings account at today's rates.
Peer to peer lending is good for both borrowers and investors. Not only can borrowers consolidate debts
and use funds for things that many traditional banks would not consider lending money for, but for
investors it provides a number of opportunities. Building an investment portfolio that is not subjected
to wild swings on Wall Street, getting a higher rate of return than traditional certificates of deposit
or savings accounts and minimizing risk by diversifying are just a few of the benefits of peer to peer
lending. Want to get started? Make sure to check out Lending Club.
Disclaimer: We are not investment advisors and this article is not investment advice. Before making any
investment decisions, make sure to consult your financial advisor.
This article is written by guest author Doreen Martel
exclusively for Save For House.