Peer-to-peer (P2P) loans are one of several alternatives to credit offered by traditional financial institutions. The startups and companies that make this possible do so by connecting individual lenders to borrowers, whether they’re other individuals or businesses. This presents a real opportunity to earn significant interest as a lender, if you know how to make money with P2P lending platforms.
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Most Nigerians still think of loan apps and websites as merely digital vehicles for dispensing loans. Only a minority of persons who have idle cash ever consider lending on these platforms a possible investment. But they are. In this article, we’ll tell you how to approach them as such and secure market-beating returns.
What are P2P Lending Platforms?
P2P lending platforms are websites and apps that allow individuals to lend money to other people or businesses. They differ from most loan apps in the sense that they do not originate the loans themselves. Their job is primarily to provide a space in which lenders can give out loans to borrowers.
The P2P apps in Nigeria make money from transaction fees and commissions on loan interest payments. However, these fees do not diminish the impressive returns that are possible with P2P loans. Payments from reputable platforms remain high even after fees are deducted.
What Kind of Returns Can You Expect from P2P Lending Platforms?
The returns on offer from most P2P loan apps and websites in Nigeria are some of the best in the country. They promise interest rates of between 25% and 35%. Actual interest for specific cases depends on a number of factors, including credit risk, sector of the recipient business, loan tenor, and loan demand and supply
Examples of P2P Lending Platforms in Nigeria
A number of apps and websites in Nigeria facilitate P2P loans. The better-known ones at this time are Kiakia and P2Vest. As always, make sure to do due diligence before deciding whether or not to invest with them. We will explain how you can do this later.
How to Make Money with P2P Lending Platforms: Steps You Can Take
Here’s how to make money with P2P lending platforms:
Know where Your Money will come from
The first rule here is not to lend money that you’re likely to need in the near future. Have emergency savings stashed away in either a savings account with a reputable traditional bank or a high-yield flexible account with a trusted FinTech platform. When you have had enough of this, you may then invest in P2P loans (and other investments for that matter).
Determine Your Risk Tolerance
The range of receptions to risk tolerance in humans is a spectrum that goes from risk-tolerant on one end to risk-averse on the other. Various factors play roles in determining risk tolerance levels. Some are temperament, disposable income, and age. As loans of this kind are often on the high-risk end, be sure that you are financially and mentally able to stomach losing your money to lenders who are unable to pay their debt.
Compare Apps and Websites
A number of apps and websites currently support P2P lending in Nigeria. You can find them by searching the web with the phrase “P2P lending platforms in Nigeria”. Find out which ones are appropriately registered and that expose you to your preferred kinds of borrowers. Other things you’ll want to ascertain are facilitator longevity, quality of their teams, and what allowances they make for their users.
Confirm that Customer Service is Responsive
It’s certainly a bad sign if you cannot reach customer service representatives at the company you’re considering loaning with. Don’t use a platform until you have found a reliable way to connect and communicate with them. In addition to this, be sure that the company/facilitator itself has a physical office. This, along with registration with the relevant authorities, confers some legitimacy (even if it isn’t a final word on the matter).
Register on Your Preferred App or Website
Ideally, registration on these platforms will be straightforward. But you may encounter hitches along the way. If you do, you should contact the help desk of the facilitating platform, email them, or send them a direct message (DM) on social media. Only use P2P lending apps or websites that have at least some—and preferably all –of these.
Lend to Borrowers
As part of your registration process, you will typically be asked to specify the range of loan sizes you would like to provide and the tenor you want.
For Peer-to-peer loans marketplaces that channel credit to businesses, you may have to choose sectors or industries from which the businesses you lend to should emerge. At least one even lets you lend only to people within defined locations, in certain types of employment, and with credit scores in a particular range. However, make sure to conduct your background checks on a borrower before deciding whether or not to lend to them.
Collect Interest Payments
Some P2P lending platforms remit interest payments from borrowers to lenders shortly after the former settle their debt. Others, especially apps that allow for longer-term loans, tend to pay lenders their interest in instalments, spread out over a pre-agreed interval (quarterly or semi-annually, for instance). If borrowers do not repay loans within the stipulated date (or if they default), you can seek redress from the platform’s parent company.
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Final Words
This concludes our article about how to make money from P2P lending platforms in Nigeria. Now you know one more way to grow your wealth. Again, always remember to investigate your options before diving into any of them.
Got a suggestion? Contact us: editor@connectnigeria.com
