Is Crowd Lending Good or Bad?

Let’s jump straight into the advantages of Crowd Lending through a mediating platform. In a previous post I have told you about Peer to Peer Lending and Crowd Lending and how this works, but now it’s time for results!

The Good

I’ll sum up the main advantages that I experience in Crowd Lending, with a short explanation on each of them:

  • Make your money work for youThat’s right, except for choosing which projects to invest in, your money works for you! After the initial deposit that you make, your money (and more) will return to you eventually. Which you can then deposit into another project to make even more money for you. All of this not only sounds good, it just is.
  • Risk analysis done for you: Before the platform publishes a new project, they will perform a thorough risk analysis in order to decide whether or not they should publish the project and to decide which risk category should be assigned to the project. You don’t have to do this – although you definitely want to spend some time figuring out the exact details of a project before deciding if it’s worth your money.
  • Contract management: The platform handles all contracts with the projects, so I don’t even have to know (if I don’t want to) who exactly I’m lending my money to. All contractual agreements are handled by the platform, let them work for you.
  • Fix this issue for me: If any problems arise regarding repayment of the loan, it’s the platform who will cover any required legal actions regarding all the investors. This means that you don’t need to know anything regarding the legal actions for repayments.
  • Decide who/what you want to invest in: When comparing to a party that invests your money for you – this is much better in the way they you get to decide where you can put your money. Browse through all the possibilities and put your money where the figures are the best and you feel good.
  • Interest on interest: At most platforms, you get your repayment and interest on a monthly basis. This actually means that you can re-invest this money in order to get the best interest-on-interest results.

The Bad

Next, I’m going to sum up the main disadvantages that I have experienced so far in Crowd Lending,:

  • Where’s my money: Unfortunately, sometimes it takes a while for your money to get back to your wallet. If the company or individual who lends your money refuses or delays on his or her repayment, that simply means that it takes more time before you have it.
  • Out of our hands: As soon as you transfer your investment to the platform, what happens to it is out of your hands. The platform will transfer the full investment to the project and apart from waiting, there’s nothing you can do.
  • But, I need my money back immediately: Too bad, the contract usually states that you will get your money back over many terms. This usually means that you will have to wait multiple years before you have the complete amount back on your own account.

And the Ugly Profit

Because of the spread of my investments between low risk and higher risk projects, the average (annual) profit I’m receiving over all my investments so far is about 8%. A lot higher than the current interest rate on my savings account!

For now I’ve dedicated about $100 each month that I invest in Crowd Lending. With an average interest rate of 8% (yearly) which is about 0,65% each month, this earns me $0,65 each month! Wait, what? That’s not even enough for… well… anything these days.

This $0,65 does not include the repayment of the loan, this is just the profit, which is fifty times as much as I would “earn” when stashing my money in a savings account. They currently offer about 0,15% interest a year in The Netherlands right now!

The good part about these monthly investments is that the earnings increase by about $0,65 each month (because I invest $100 monthly). All the money that I earn this way is also re-invested so it gives interest on interest.

Now if you keep in mind that my master plan is to keep doing the above for twenty, thirty or even more years, this interest on interest will keep on growing. And since it’s all money that I don’t need, it will give me great profit in the future.

If you’re interested in reading more experiences of others who also use Crowd Lending as a passive income stream, then make sure to check this post from the Millenial’s Guide to the Universe: Crowd Lending.

5 thoughts on “Is Crowd Lending Good or Bad?

  1. I don’t mind crowd funding campaigns if it’s a local business trying to get a head start and if they’re offering decent incentives. But I think the whole concept has gone a bit too far and is being overused, you see campaigns for everything these days.
    I have a co-worker who absolutely despises the idea, he just recently swore off one of his favourite restaurants after he found out they started out via kickstarter.


    • Thanks for responding, Sarah!

      What do you think are the arguments of your co-worker for despising this idea? What’s wrong with financing your plans by starting a crowdlending/funding campaign instead of going to a bank for a loan?

      Apart from that, I’m also really wondering why you are okay with locals trying to fund their business like this, but that it’s being overused from a greater perspective – if it works, what’s so bad about it?

      Really looking forward to your reaction.


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