Why SHOULD you lend to people?
Lending money can be a very tricky thing. In fact, many debates have gone on in our office as to whether it’s better to lend money to family and friends or to more distant acquaintances. Concerns are usually centred around the lender’s confidence that the borrower will pay back at the right time without resorting to threats of legal or bodily harm. Essentially, it’s boggy ground that most people prefer to avoid.
However, what if there was a way to eliminate this concern? Would you be willing to consider lending more money out? The question then becomes, “What’s in it for me?” That’s the one we are going to answer with this article. Contrary to what many people think, there are actual advantages to lending money especially on a peer-to-peer lending platform like FINT. Here are a few:
- Risk is significantly reduced. As earlier stated, the major fear people have with lending out money is the inability of borrowers to pay back. However, on a peer-to-peer lending platform you can rest assured that the appropriate due diligence has been carried out on each borrower; a credit score has been assigned (you can read more about what this credit score means and how it helps you as a lender); and every loan issued is insured against default. This suggests that no matter what happens to the borrower, the platform is set up to always protect the lender’s interest.
- You enjoy higher returns. Look, Treasury Bills and money market funds at 12% are good investments but why settle when you can enjoy up to 40% in interest. Why are we able to give such returns? Because we understand the time value of money and we understand the need for a premium to act as a cushion for the risk – greatly reduced, of course – you’re taking.
- You can choose who you lend to. You know that awkward moment when that family debtor calls you and your stress levels go up? Yeah, you don’t have to deal with that with this sort of lending. It’s an entire faceless process where you’re furnished with all the information you need to decide who you would like to lend to. If you’re uncomfortable with a borrower’s loan purpose or credit score, you can choose not to lend to them and not suffer through emotional blackmail or familial condemnation.
- Finally, you’re making social impact. We really like this reason because it brings to bear our capacity to lift each other up. In Nigeria, our economy has been set up in a way that we cannot rely on the government, systems or policies to make progress. For the simplest resources, we must now rely on each other. It’s so amazing for us to see even as little as N20,000 lent out on our platform because it means that one more person is closer to doing that thing they would otherwise have been unable to do.
Essentially, we’re saying that your loan on the FINT platform goes a long way to help someone buy the equipment they need to scale their business; or maybe take someone else closer to paying tuition for their MSc and finally be able to apply for that dream job; or perhaps provide financial launch pad that will catapult them to entrepreneurship and some of the greatest ideas this world has ever seen. And all that can be done without the hassle of chasing up on your money with additional benefits to you. Doesn’t that make you feel good?