A slew of affordable financial products to hit the market in recent years means the cash-strapped and asset-poor can now invest like the wealthy – and you don’t even need $100 to get started.
Money magazine raises the hood on three investment vehicles – peer-to-peer loans, micro-investing apps and fractional property – worth exploring when you want to start investing.
Peer-to-peer (P2P) loans
How they work
Individuals investing in these managed investment products in effect become “alternative banks” offering more competitive secured and unsecured loans. In addition to pocketing a platform fee from the loan costs borrowers pay, P2Ps may charge an application fee. The remainder of the interest rate paid on the loan goes to investors.
As well as deciding how much you want to invest, you may also decide how your investment is used. Based on creditworthiness, you might fund just one particular borrower or invest in a wider basket of loans. You may (in some cases) get to choose an interest rate and loan period that best suits you.
Loans are returned to investors according to pre-set repayment schedules, and you can have capital repaid along with loan repayments or at the end of the loan period.
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