Just about everybody these days is looking for a way to create residual income to either build wealth or get through some uncertain financial times. Luckily, there are so many ways of going about this these days that the choices are overwhelming. You have a lot of choices and don’t even need a lot of money to start investing to create this type of income stream.
With Bitcoin on everybody’s minds these days, it is being looked at closely for opportunities to make money. Besides buying and trading Bitcoin, you can take another less hands on approach and put some money into Peer to Peer (P2P) lending.
It is less of a risk than playing the market in cryptocurrency and can allow you to double dip in the profits. Not only are you enjoying earning interest from the loan, but when Bitcoin rises in value so does your portfolio.
In this article, I will go over some of the things to keep in mind before you invest.
How does P2P work?
If you are at all familiar with any type of P2P lending then you already know the basics of how it works. The difference is that you are dealing with cryptocurrency and the blockchain which makes things slightly different in the practicalities of it.
For instance, you need to get yourself a digital wallet, but it needs to be the best Bitcoin wallet in the market as you want to be very safe with your money. Once you have your wallet set up, then you will need to buy some Bitcoin. You can use your credit card, or even another cryptocurrency if you don’t already have some.
Once you decide that you want to lend, then you have to decide how much you are willing to part with. Remember that you can lose this money so you should only invest as much as you can afford to lose. Then load up your wallet with this amount of Bitcoin.
Find the right platform
There are a lot of different types of platforms out there on the blockchain that offer this service but you want it to have a few core features. Firstly, you want to make sure it is a secure platform that keeps your Bitcoin safe during the transaction. Coinformant has a list of secure exchanges where you can start trading crypto with confidence.
Make sure to read their statement on their policy for safety and look that they use a protocol that works.
Secondly, it is a good idea to go with a platform that uses an advanced algorithm to match you to the best borrower based on your needs. You can choose how risky a borrower you are comfortable with and will make more or less interest based on that risk.
If you are looking for a big payout then you can choose the borrower with the higher risk. Or, play it safe and set yourself up with one who has shown to be a trusted borrower than pays back in time. This will pay less interest, however.
Then, figure out how long you want the term of the loan to be. The longer it is the longer you have to wait for your money.
*This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be, investment, financial, or other advice.