Why Marketplace Loans
Investing in Marketplace Loans: A Self-Directed Option for Your Retirement Plan
Marketplace loans, also known as P2P loans, are an innovative investment opportunity that can be included in a self-directed retirement plan. This type of investment allows investors to diversify their portfolio and potentially earn higher returns. However, it's important to understand the risks and benefits of this option before investing.
Higher Potential Returns with Higher Risks: Marketplace Loans for Your Retirement Plan
According to the Peer-to-Peer Lending Association, marketplace loans offer higher potential returns to investors compared to traditional asset classes, such as stocks, bonds, and cash. While this may be enticing, it's important to recognize that these investments come with higher risk. Borrowers may default on their loans, and investors may lose their principal.
How to Invest in Marketplace Loans Through Your Retirement Plan
Investors who are interested in investing in marketplace loans can do so through a self-directed IRA or 401(k) account with a financial institution that offers this option. This allows for greater control over the investment portfolio and offers the potential for higher returns. However, it's crucial to diversify the portfolio and carefully consider the risks associated with this type of investment.
Many marketplace loans offer low interest rates, which can be attractive compared to traditional savings account rates. This can prompt people to consider using marketplace loans to make the most of their money.
Despite its decentralized nature, most cryptocurrency transactions are very secure. This is due to the underlying blockchain technology, which is inherently secure.
Secondary markets offer investors the chance to sell their loan parts to other investors, providing liquidity in case of an unexpected need for access to funds.
Ease of Use
Many investors find marketplace loan platforms relatively easy to use compared to other investment types, such as stocks and shares. They tend to be fully online, with minimum investment amounts that can provide a good opportunity to dip your toe in the water if you're still relatively new to investing.
Marketplace loans generally have much lower risk than stocks and bonds, since the borrower either pays off the loan or not. If you choose to invest in low-risk loans, you can usually expect to receive the interest rate you signed up for.
Marketplace loans can be used for a wide variety of purposes, which gives investors a lot of choice when it comes to lending money. Some of the most common uses are funding small businesses, helping clients grow their property portfolios, or funding housing developments.