97. Person-to-Person Loans (P2P Loans) – P2P loan companies, most notably Prosper and Lending Club, allow an investor to loan money to someone and to receive (hopefully) a return on their investment.
By spreading out small amounts of money such as $50 over a large number of loans (instead of say $15,000 to one loan), the risk of one loan defaulting and wiping out one’s entire investment can be managed.
Some investors design elaborate filters to automatically invest only in certain loans that meet their strict criteria. Because the loans are generally unsecured, a successful P2P investor needs to develop the skills a credit card company has when it comes to loaning money.