is a form of lending that connects people who want to borrow money with people who want to lend money. Two of the biggest players in the P2P industry are Lending Club and Prosper Marketplace. The average returns from P2P loans are much better than you would get from a savings account or CD. Of course, the risk is also much greater. I would put P2P lending in the category of stocks as far as risk goes.
I have had pretty good luck with P2P lending. My portfolios at both Lending Club and Prosper returned over 10%. There was a bit of luck involved in this since both sites were riskier when I first started lending. They have strengthened their lending guidelines since then.
If you are going to invest in P2P loans my suggestion is to diversify as much as possible. You can invest as little as $25 in a loan. I only invest $25 per loan so I can diversify my investment across as many loans as possible. I also like to diversify across the grades of loans. I mostly invest in the higher grade loans, but invest a little in the lower grade loans as well to boost my overall return.
I don’t have any money in P2P right now, because I’m concentrating on building up my dividend stock portfolio. Once I have my stock portfolio complete I plan to invest in P2P loans again. Since they are risky and you can potentially lose all of your investment I will be keeping them to a small percentage of my portfolio.