Everyone needs money to buy things and to survive. But if you handle your financial plan different from everyone else you can live like no else in the future. Last article was about avoiding borrowing money from others. Now let’s talk about the other side of the coin, lending out money yourself.
We live our life spending money and enjoying our life with it. With a small change in our thinking and our financial plan it will become much more easier to become financially free. When you are going to a financial institution to borrow money there is only one certainty. If you receive money from them you will be paying interest and a high percentage from it.
Large fortunes are all founded either on the occupation of land, or lending or the taxation of labor. – John Ruskin
If you consider how much banks make from lending out money, you can imagine how it can make you money as well. However be cautious and don’t lend your money to family and friends, even if they promise you a nice return. Only give them money if you want to help them, don’t do it for profit. It can cause immense stress on your relationship.
There are many systems out there that allow you to lend your hard earned money out to others. Be carefull where you put your money in, make sure to only lend money that you are willing to lose. Never use your emergency fund to try and make a profit. Some people like platforms that allow you to lend your money to individuals, called “Peer to peer lending”. This is a very risky investment, you never know who you are lending your money to. A better option is business crowdlending, where you lend money to small to medium size companies.
Always spread your risk over different companies, only put money in it you are willing to lose and consider the interest percentage that is being promised. If extremely high interest of more than 10% consider it as an extremely dangerous investment. Personally I don’t even go above 7%, the reward isn’t worth the extra risk.