Monday, May 25, 2015

Now I'm helping finance your Ferrari

In the aim of inching myself one step closer to not only another Nobel Peace Prize but also the title of Nicest bloke in the Galaxy, I've invested in some Peer to Peer lending.

No no, you're welcome. 
So the next time you jump into your Ferrari 599 GTB and turn the key, please make sure you utter a quick prayer of thanks to yours truly. Because without me, you'd probably be driving a Corvette or something cheaper instead..

Wait, what is this peer to peer lending you speak of?


Relatively new, P2P lending is all about people lending money to other people through services like Ratesetter and the like. They pay the loan back over whatever term is set and the lender of the coin is paid interest (after fees taken out by the P2P service of course.) It's not lending your mates some cash and threatening to break their legs once a month when they fail to pay you back. For example:

Almigo ponies up a whopping $10 to Ratesetter and says 'find me someone who needs this money please.' Ratestter finds Amanda who needs $10,000 for renovations. So they take Almigo's fantastic tenner and then find other Peer to Peer lenders to make up the remaining $9,990 and when they have all that money ready to go, they set loan terms, give Amanda the money and hopefully Amanda doesn't go out and spend it all on turbo upgrades instead. Every month Amanda pays back part of the loan and interest and Ratesetter distributes all the cuts to all the lenders. Almigo rubs his hands in glee as he's making about 15 cents a month on top of the money he's invested. It'll be the good tinned tuna this month!


Google tells me this is 'Amanda.' Please spend my ten bucks wisely. 


So instead of this:

BANK/FINANCIAL INSTITUTION lends money to BORROWER and makes money from INTEREST.

P2P Lending is like this:

PEOPLE WITH SPARE CASH put money into P2P LENDING SERVICE who in turn lends this money to BORROWER. PEOPLE WITH SPARE CASH make money from INTEREST, while P2P LENDING SERVICE makes money from FEES.

Or for a more technical explanation of it all, have a read of this.

Of course there's plenty of terms and conditions whether you borrow or lend money so it's best you actually do your homework before you sell your kids into slavery to attempt to turn a buck or two in the P2P Market (and which P2P system would work for you). But for a small scale investor like myself using beer money, I'm enjoying it so far.

Now while I'll never actually know or meet who my invested funds went to, I have theorized that any of the following scenarios are probably highly like to have occurred during my lending generosity:

-John's son John Jnr needs a first car. After countless hours of playing Need for Speed 3, John decides an Italdesign Scighera would be ideal. He applies for a loan for hundreds of thousands of dollars and Almigo chips in an incredible $10 to the cause.

-Mary wants to open a cafe where the staff all wear hockey masks. She applies for a loan of $125,000 and Almigo chips in a whopping 10 bucks for one of the staff to really get behind their Friday the 13th dreams.

-Bob wants a slab of beer to get through a bad breakup. He applies for $35. Almigo's $12.50 plays a big part of Bob actually buying beer worth drinking and not those Duff half cans.

-Jimmy wants to start a blog to rake in millions of dollars. He doesn't get a cent from Almigo as that would be competition. Too bad Jimmy.

Sometimes it's fun to be a rich bastard! :D

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