Which Is Better, a Savings Account or Peer-to-Peer Lending?

People often worry about how they will manage to save enough money for larger expenses down the road, for retirement and or for any number of other issues. In fact, the concern about being able to save enough money to live comfortably is one of the major stresses that weighs on the minds of most individuals. If you are one of those individuals, you might be wondering whether you should put your money in a savings account and forget about it or get involved in peer-to-peer lending, also referred to as P2P lending. The truth is, there are advantages and disadvantages to both of these systems. With that being said, it is vitally important that you fully understand what the potential benefits and risks of each one are so that you can make an educated decision concerning your future.

Advantages and Disadvantages of a Savings Account
A lot of people put their money in a savings account and hope for the best. It is understandable because this is the safest method of saving for the future. Unlike stocks and bonds, you don’t have to worry about having more money than you know what to do with one day and then having it all wiped out through no fault of your own the next. For many people, this alone is enough to make them decide what to do. However, you might not have considered the idea that when you put money in a savings account, any money that goes into the account is largely what you are capable of putting there yourself. This means that you are taking a chunk of money out of your own paycheck in order to have any hope of saving money for the future. Money that is earned from the cash that is already sitting in the account is typically not even enough to get your attention. This means that your money is not working for you when that is exactly what it should be doing.

Peer-to-Peer Lending
Essentially, this is a form of lending that uses a certain platform in order to help people decide which businesses they should invest in. It is safer than typical stocks and bonds and there are several other things about this type of lending that are quite beneficial. For one thing, you have greater control over your decisions and thus, over your money. There is also the potential for greater earnings because you are directly involved with the business that you choose. If it does well, so do you. Because you have a personal stake in it, it gives you more control over choosing a business that will be successful in the future. It also gives you the opportunity to be involved in selected businesses that you have a genuine interest in.

Potential Risks
Of course, there are risks involved in everything, especially things that are really worth doing. When it comes to peer-to-peer lending, the risk is that you will invest in a business that might fail. If it does, you might not get a return on your investment like you had expected. This is especially true if the business fails shortly after you have made the decision to invest because it gives you very little time to recoup any of that money. These risks can be minimized by doing your homework and investing in businesses that have a proven track record.

Summary
The very idea of taking risks with your money is a little frightening. However, people that are unwilling to take risks are usually the ones that end up paying the price for it in the end. You have probably heard the saying that little risk offers little reward. For the most part, this is true. If you want to have the potential to grow your wealth and do it in the safest way possible, peer-to-peer lending is definitely something that you should look into.