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Professional investors like Ray Dalio and Warren Buffett are in agreement. Bonds are an important part of a healthy financial diet. And the legit only place I buy bonds, this is 100% true, you can totally check my account, is public. The modern brokerage for investors looking to build an awesome multi-asset portfolio.
And a quick moment of humility here. I have been trying to work with Public for years now and low-key stock them because I am such an avid Public user and every other app or site I've tried to buy bonds on has actually made me want to rip my hair out. Public is so easy to use and has thousands of bonds to choose from and not just US treasuries, but corporate bonds too, like for the magnificent seven stocks like Apple, Meta, and Nvidia.
And you can use public for more than your bond investments. On public, you can find all other major financial food groups, stocks, ETFs, high yield cash accounts, options, and even music royalties. If you're looking for a simple yet sophisticated investing experience, go to public.com/moneyrehab. One more time, because trust me, you will thank me. It is public.com/moneyrehab. This is a paid endorsement for public investing. Full disclosures and conditions can be found in the podcast description.
I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Hello, new house.
Have you always wanted to be the bank? Did you know you actually could be? There's a system offered by some financial platforms called peer-to-peer lending, where people like you and me could lend and borrow money from other people. And if you not only want to be the bank, but you don't want to use a bank to borrow money, this could be a fit for your lending needs as well. Today, I'm going to break down what peer-to-peer lending is, how it works, and the pros and cons for both the lenders and the borrowers.
Peer to peer lending is a way of financing that allows people to borrow and lend money without using an official financial institution as an intermediary. So think of it as the Uber for your finances. There's a platform that connects people with money to lend directly to those looking to borrow money. These transactions are facilitated through peer to peer lending platforms, which handle the nitty gritty details of matching lenders and borrowers, assessing risk and processing the payments.
For people looking to make money on peer-to-peer lending, this money move offers potentially higher returns compared to traditional savings accounts or bonds. For borrowers, it provides access to money that might be unavailable through traditional bank loans, often at more favorable interest rates. Getting started with peer-to-peer lending is straightforward. As a potential lender, you would have to sign up on the platform, deposit money, and then browse available loan listings.
Each listing provides details about the borrower, including their credit rating, the purpose of the loan and the interest rate offered. You can choose to fund the entire loan or just a fraction. Funding a few different loans fractionally is a common move because it allows lenders to diversify investments across multiple borrowers to spread out that risk.
If you're thinking about investing in peer to peer lending, here are four things you should think about. Number one, fees. Most platforms charge service fees, which can range from one to 5% of the loan repayment. So that's not the interest rate that you'll be making as a lender. That's the fee you'll be charged by the platform. It's really important to understand these fees as they can impact your overall returns.
Number two, risk. The biggest risk in peer to peer lending is borrower default. If a borrower fails to repay the loan, you could lose your investment. Platforms mitigate this risk by providing detailed credit information and sometimes offering collections services. But there is always some level of uncertainty.
Number three, benefits. Potential for high returns is a big perk here. Interest rates on peer-to-peer loans can range from 5% to 36%, depending on the borrower's credit worthiness. Also, peer-to-peer lending allows for portfolio diversification beyond traditional stocks and bonds. And we love diversification.
Number four, the platform. Before signing up, shop around at different peer-to-peer lending platforms and evaluate the platform's reputation, fee structure, borrower screening process, and historical performance data. Look for platforms that offer robust risk assessment tools and have a solid track record.
Now let's talk about the borrowers. If you're interested in borrowing from a peer, the process involves creating a profile, submitting a loan application and waiting for approval. Once you're approved, your loan is listed on the platform for potential investors to review. If your loan gets fully funded, you receive the money and start making payments according to the agreed terms.
As a borrower, you can look to peer to peer lending for anything you want a personal loan for, like debt consolidation, which is where you basically consolidate high interest rate debt into one single loan with a lower interest rate or home renovation projects so you can get more money to play with without tapping into your home equity.
You can also get a peer-to-peer loan for personal expenses like covering medical bills, wedding expenses, or major purchases, or even startup costs for your side hustle. If you need a loan and are considering peer-to-peer borrowing, here are four things you need to think about.
Number one fees borrowers typically pay an origination fee, which is a percentage of the loan amount, usually 1 to 8%. This fee is deducted from the loan before you get the money. Meaning if you took out $1,000 loan with a 1% origination fee, you would only receive 990 bucks. Also late fees or repayment penalties might apply. So please read the fine print.
Number two, risks. While peer-to-peer loans can offer lower interest rates, they can also come with strict repayment terms. Failing to make timely payments can negatively impact your credit score and result in higher overall costs due to late fees. So just because you're borrowing from a peer doesn't mean you're borrowing from a friend that's going to let it slide if you start falling behind on payments.
Peer-to-peer lenders have pretty much all the same roles as banks, so don't go in thinking that this is NBD. It can be a very BD if you don't have a foolproof repayment plan. Number three: benefits. Peer-to-peer loans have lower interest rates compared to credit cards or other high interest rate loans. They can also be a lifeline for individuals with moderate credit scores who might not qualify for traditional bank loans.
4. The fine print. Evaluate the total cost of the loan, including interest rates and fees. Understand the repayment schedule and any potential penalties for late payments or early repayment. Choose a platform with a transparent application process. Good customer service is a must.
Net net peer to peer lending is transforming the financial landscape by connecting borrowers directly with investors, offering a win win solution in so many cases that traditional banks can't always provide for investors. It's an opportunity to earn attractive returns and diversify their portfolios. For borrowers, it offers accessible financing options, often at lower rates than those of conventional loans.
For today's tip, you can take straight to the bank. If you're looking for a loan, it probably feels like you're the one being evaluated. But don't forget that you have just as much power to evaluate your potential lender, too. Don't be afraid to ask for what you want and don't be afraid to try to negotiate rates. There are a lot of lenders out there, and the worst thing they can say is no. And if they do, well, thank you next.
While you're binging the pod, how about a little bonus tip? As a starting place for your investment allocation that you can, of course, tailor depending on your goals, pros recommend making your bond allocation your age. How about a second bonus tip? When you want to invest in bonds, use public. The modern brokerage for investors looking for a simple yet sophisticated investing experience.
Public is truly the only place I buy bonds, legit, because every other app or site I've tried to use is so complicated, but on Public, I can buy a bond on my iPhone in less than five minutes. This is a major upgrade because most investing platforms that offer bonds design their user experience before the iPhone was even invented. I'll let that one sink in. And you can use Public for more than your bond investments.
Public is the brokerage I use for all my investing needs, whether I'm looking for stocks, ETFs, a high-yield cash account, options, and other assets, even music royalties. To build the multi-asset portfolio of your dreams, go to public.com slash money rehab. One more time, because trust, you will thank me, public.com slash money rehab. This is a paid endorsement for public investing. Full disclosures and conditions can be found in the podcast description.
Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.
Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.
Money rehabbers, you have money hidden in your house. Yeah, just hiding there in plain sight. Okay, so I don't mean you have gold bars hidden somewhere in walls, treasure map style, but you do have a money-making opportunity that you're just leaving on the table if you're not hosting on Airbnb. It's one of my all-time favorite side hustles. By hosting your space, you are monetizing what you already own. It doesn't get easier than that. For me, hosting on Airbnb has always been a no-brainer. When I first signed up, I remember thinking to myself, sell
you pay a lot of money for your house. It is time that house returned the favor. And to get real with you for a sec, I felt so much guilt before treating myself on vacation because traveling can be so expensive. But since hosting on Airbnb, I feel zero stress for treating myself to a much needed vacation because having Airbnb guests stay at my house when I'm traveling helps offset the cost of my travel. So it's such a win-win. I mean, if I could do it
you could do it. And your home might be worth more than you think. Find out how much at airbnb.com slash host. Money Rehabbers, you have money hidden in your house. Yeah, just hiding there in plain sight. Okay, so I don't mean you have gold bars hidden somewhere in walls, treasure map style, but you do have a money-making opportunity that you're just leaving on the table if you're not hosting on Airbnb.
It's one of my all-time favorite side hustles. By hosting your space, you are monetizing what you already own. It doesn't get easier than that. For me, hosting on Airbnb has always been a no-brainer. When I first signed up, I remember thinking to myself, "Self, you pay a lot of money for your house.
that house returned the favor. And to get real with you for a sec, I felt so much guilt before treating myself on vacation because traveling can be so expensive. But since hosting on Airbnb, I feel zero stress for treating myself to a much needed vacation because having Airbnb guests stay at my house when I'm traveling helps offset the cost of my travel. So it's such a win-win. I mean, if I could do it, you could do it. And your home might be worth more than you think. Find out how much at airbnb.com slash host.