The Do’s & Don’ts of Investing in Peer to Peer Lending Business in This Festive Season
With all the hustle and bustle that’s going on in most of the shopping malls in Nairobi, it’s almost difficult to not get a hint of what’s about to go down. Ladies and gentlemen, the festive season is here! And as you know, many Kenyans would love to take this auspicious occasion to relax and unwind, most probably in the company of close friends and family. That said, you can be smart enough to ensure you are not only having a good time but also making some money while you are at it.
And that’s where peer to peer lending comes in. But before you get into all that, you have to fully understand the holy grail of how peer to peer lending works, especially during the festive season. That’s the only way you can avoid falling into the usual traps that most people fall for. Thankfully, we are here to ensure that you don’t become most people. Without further ado, here are the do’s and don’ts of investing in a peer to peer lending business during the upcoming festive season.
Let’s start with the dos, shall we?
If you understand how to go about the peer to peer lending and how it works, then you can make yourself a small fortune before the ever-dreaded Njaanuary strikes. The following are a few things you need to do before immersing yourself into the game:
1. Get your finances in order
Basic logic dictates that you can only lend money that you have. Therefore, you might want to check your Mpesa and bank accounts to see if you have some money that you can, in turn, invest in your lending business. It’s important to note that no one will trust a broke lender. I mean, how can you expect to lend money when you look like you don’t have enough to sustain yourself?
If you don’t have enough money to lend, then it’s better to get a few friends and raise the amount. The latter will ensure you are left with enough to not only lend but to sustain yourself, as well as your family.
- Seek advice if you can
Running a successful peer to peer lending business requires vast knowledge about how money works. Therefore, you might want to take some time and learn more about the trade. If you don’t have an accountant friend who can walk you through the business, worry not, because that’s why the internet was invented. Feel free to take as much time as you can and learn before you think of minting money through peer to peer lending.
- Only lend to reliable people
We all happen to have a group of friends that we trust and those that we don’t. the latter should be one of the first things you ought to consider before you get into the lending business this festive season. You might want to start with making a list of reliable friends as well as those that you don’t trust that much.
Once you’ve done so, proceed to make them know that you’re lending some money and be ready when they start borrowing. Also, remember to be as professional as you can, even when you are lending your money to close friends and family. Doing so will allow them to understand and therefore make a distinction between you and your business. That way, they won’t make any assumption when it comes to making payments.
- Get a lawyer involved
I’d be lying if I told you that the peer to peer lending business comes without its fair share of drama. Have you ever heard of the phrase, kikulacho kii nguoni mwako? I bet you have. Sometimes that friend you think will never stab your back is the one that usually ends up putting a machete through you. And the worst thing about such kind of betrayal is that you are unlikely to see it coming, and that’s where a lawyer comes in.
Before you lend money to anyone, make sure you have a contract drafted and signed. The latter should happen in the presence of a lawyer. That way, whenever someone decides to ghost you, all you have to do is hand over everything to your lawyer and let him other deal with the situation the right way. Besides, a peer is most likely to pay when he or she is contractually obligated to do so. It’s either that or you get a rude reminder that Hii Ni Nairobi. That said, it’s way better to be safe than sorry.
The choice is yours.
Just like Curate’s Egg hypothesis suggests, everything under the sun (including the sun itself), has a fair share of the do’s and don’ts. So, it’s no surprise that peer to peer lending comes with its set of don’ts. Below are four of those:
- Don’t be in a rush to collect
If you do this correctly, then your money will always accrue interest the longer the borrower takes time to repay. In layman terms, the longer you wait, the more you’ll make. That’s why it’s important to take time and learn how money works as reiterated earlier. That said if the borrower contacts you with the intention of extending the loan payment period, because Njaanuary happens even to the best of us, accept if you can. This is because doing so will end up working to your best interest.
- Don’t pester your clients
Still, in the spirit of surviving Njaanuary, some clients may encounter obstacles when it comes to making payments at the correct time. It is normal. So, when it happens, try to be understanding and realize that perennial phone calls and threatening text messages won’t make them produce the money. If anything, it only exacerbates the situation for both of you. For your borrower, he or she will become stressed hence making it harder for them to come up with the money. For you, you’ll only end up looking like a sadist that no one would ever want to borrow money from, ever again. So, be careful about how to ask for your money.
- Don’t borrow to lend,
If you don’t have the money to lend, then it would be in your best interest not to borrow. The latter is so because, and sample this; should your bona fide borrowers fail you, which happens on occasion due to unavoidable circumstances, then you’ll officially be screwed. Even if they end up paying on time, the profit margin will still be small because you’ll have to pay back what you owe, which will make it not worth the effort.
A Final Word
We can’t stress enough how understanding peer to peer lending business is important, especially during the festive season. Only a simple mistake, or misjudgment for that matter, can lead to catastrophic losses that may take you a while to recover. Thankfully, there are Once you’ve found a way around it, the rest will be as easy as telling a B for a bull’s foot (if they still use these kinds of phrases anymore).
Be sure to read as much as you can about the best lending platforms and make your mind before immersing yourself into the business. That said, if you happen to have any further questions, you know we as Presta will always be there to extend that much needed Olive branch. With that, have an amazing holiday making some money.