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Peer to Peer Lending (How Does P2P Lending Work?)

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Looking for a new investment avenue to boost your wealth? Or maybe you need to borrow money to open up your own business or afford a down payment on your first home? Whether you need a loan or want to capitalize on loans, peer-to-peer lending may be worth checking out.

In this post, we’ll break down what peer-to-peer lending is, how it works, and what pros and cons are associated with this lending option (for both investors and borrowers). Read all the way through for an in-depth look at peer-to-peer lending, or use the links below to skip throughout the article.

What is Peer-to-Peer Lending?

According to the Small Business Administration, peer-to-peer lending (aka P2P lending), is a way consumers and small businesses can access capital via the internet. Peer-to-peer lending is almost like taking a loan out from the bank, except that your bank is one of your peers. So instead of a credit union or big bank lending you money, it could be your neighbor, Seth, Claire, or any other individual or institutional investor.

P2P lending enables borrowers to access moderate capital to fund their business launch, consolidate their debt, or fix up their house, among other things, while individual investors can earn money through interest on the loans that they fund.

How Peer-to-Peer Lending Works

Now that you get the gist of peer-to-peer lending, let’s go over how P2P lending actually happens:

Whether you intend to lend or borrow money through a peer-to-peer lender, you’ll need to start with a lending platform, such as UpStart, Funding Circle, Prosper, or Lending Club. These platforms are where borrowers and lenders are partnered up so that they can create loan agreements.

If you’re an investor, you can choose which types of loans you want to invest in, like business or personal loans, for example. Additionally, investors can generally choose the amount of risk they’re willing to accept, as well as determine the timeline that they want to lend. Keep in mind, lending platforms each have their own qualifications for who can and can’t invest in loans through their marketplace, so you’ll have to be approved as an investor before you can start investing money in your peers.

If you’d like to open up a loan with a peer-to-peer lender, you’ll need to go through an application process provided by the lending platform of your choice. Each one works a little differently, but most include credit checks.

From there, you’ll either be approved or denied a loan. If you are approved, you’ll be presented with financing offers from different investors who may agree to fund your loan. Sometimes it can be a single investor, while other times, multiple investors will fund your loan, in which case, your loan payments and interest will be divided up among them.

Like any other loan type, peer-to-peer loans also have interest rates, which is how individual investors can turn a profit. Of course, the lending platform also wants in on the deal, so they’ll charge a small fee to the investors.

What can P2P loans be used for?

It depends on what type of loan you open and what loan types your lending platform offers. One of the most common uses for P2P loans is funding for small businesses. According to the House Committee on Small Business, the top peer lending platforms, Prosper and Lending Club, have helped investors finance $200 million in personal loans used for small business purposes.

Additionally, these platforms also offer the following loan types:

  • Lending Club offers personal loans, business loans, auto refinancing, and medical care financing.
  • Prosper offers several other loan types, including:
    • Debt Consolidation Loans
    • Home Improvement Loans
    • Short Term & Bridge Loans
    • Auto & Vehicle Loans
    • Small Business Loans
    • Baby & Adoption Loans
    • Engagement Ring Financing
    • Special Occasion Loans
    • Green Loans
    • Military Loans

Not seeing the loan type you’re looking for? There are several other lending platforms that offer P2P lending, more on that in a moment! Keep in mind that personal loans are known to be pretty versatile when it comes to what they can be used for. Debt consolidation, medical bills, and student debt are a few common applications for personal loan use.

Note: Like any other financial decision you make in your lifetime, it’s important to consider the various lending options you have available, whether that’s borrowing from a different P2P lender, or going with a different lending method altogether.

Benefits and Drawbacks of P2P Lending

Depending on which side of the loan agreement you’re on, peer-to-peer lending has different benefits and drawbacks, which can also vary depending on your financial situation and lifestyle. Here are a few of the pros and cons you may experience as a participant in the peer-to-peer lending sphere.

For borrowers

  • Pro: Borrowers can obtain loans in smaller amounts.
  • Pro: Smaller peer-to-peer loans can typically be paid off faster.
  • Pro: The peer-to-peer lending process can be faster than conventional loans.
  • Pro: P2P loans are typically unsecured, so borrowers don’t need to use their property or assets as collateral.
  • Con: Borrowers can keep their anonymity from investors and only communicate with the lending platform as necessary.
  • Con: Peer-to-peer loans may have higher interest rates than conventional loans. However, certain economists argue that P2P loans offer savvier options when compared to credit card lending.

Important Note: Like any other loan type, your loan rate can vary based on your credit history, credit score, and other factors that influence your lender’s approval and offer process. In general, those with high credit scores are more likely to be eligible for better loan terms, including lower interest rates in some cases.

For investors

  • Pro: Getting started is simple and so is managing investments.
  • Pro: You can tailor your budget, profile, and risk assessment to your needs.
  • Con: Peer-to-peer loans are not insured or backed by the government, which could present substantial financial risk if the borrower defaults on the loan. However, P2P lenders are now required to register with the SEC to mitigate risk.

Investing in P2P loans presents some level of risk to investors, no matter which loan types they choose to fund, that’s just the nature of investing! No matter what investment avenue you choose—stocks, bonds, penny stocks, etc.—keep investment best practices in mind. For additional guidance and general investment advice, check out this post on how to start investing.

Special considerations to make about P2P lending

Before taking out a P2P loan, the Consumer Financial Protection Bureau recommends taking the following precautions:

  1. Review your income and spending.
  2. Look at your budget to determine what you can afford to pay, and how much you need to borrow.
  3. Check your credit and look for any discrepancies—mistakes on your credit report can reduce your score.
  4. Learn about your options by shopping around.

Top P2P Lending Platforms

We’ve already mentioned Lending Club and Prosper as two of the most popular P2P lending platforms, but they’re not the only options out there! Here are a few of the other major P2P lending platforms to choose from:

When choosing a peer-to-peer lending platform to work with, consider using resources like the Better Business Bureau and the Consumer Financial Protection Bureau to help you find the platform that’s best for your financial interests and security.

Some platforms even focus on financing loans for certain groups like small businesses, female entrepreneurs, and veterans, so it’s worth looking into a variety of options before making your decision!

Key Takeaways

  • Peer-to-peer lending is a financing option that enables individual investors to offer loans to individuals seeking personal, business, auto, and other types of loans.
  • Peer-to-peer lending takes place on P2P lending platforms, which create a user-friendly space for both borrowers and lenders to make loan agreements for a fee.
  • Both borrowing and lending through P2P lending platforms come with several pros and cons to be aware of before moving forward.
  • There are several lending platforms to choose from—be sure to properly vet your options to find the solution that’s best for you!

Need support coming up with a budget to pay off loan debt? Or a budgeting strategy to position you to start investing? Mint enables you to create personalized budgeting solutions to help you reach your goals.

Sources

Small Business Administration | House Committee on Small Business | Experian | The Federal Reserve | LendingClub | Nasdaq.com | Consumer Financial Protection Bureau | The Balance | Better Business Bureau

The post Peer to Peer Lending (How Does P2P Lending Work?) appeared first on MintLife Blog.

By: Mint.com
Title: Peer to Peer Lending (How Does P2P Lending Work?)
Sourced From: blog.mint.com/investing/what-is-peer-to-peer-lending/
Published Date: Fri, 01 May 2020 11:40:17 +0000

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Are These Marijuana Stocks Built For Long Or Short Term Success?

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Would You Invest In These Marijuana Stocks In 2021?

For the last several month’s investors have found a renewed interest in marijuana stocks. From mid-2020 to currently in 2021 cannabis stocks have been on the move. Many pot stocks from various niches have been rising in the market. Some marijuana stocks have not only reported record earnings but some have seen back-to-back all-time highs. With the amount of money being invested with the hopes of federal cannabis reform, people are trying to jump on board before the boat leaves the dock.

The cannabis sector as a whole has been on fire. Many companies in the cannabis industry have been preparing for what’s next to come. Meaning most cannabis companies are making operational adjustments to be able to adapt to the future of the cannabis industry. For example, 2 big-time cannabis companies both teamed up to make the biggest cannabis company on earth. Tilray Inc. and Aphria Inc. joined forces which have helped both companies market performance to a degree.

As well other companies have taken notice and may follow the same path. A lot is changing for the cannabis industry between legislation, more states going legal, and new regulations. All these variables play a factor in how this sentiment impacts the market. With more positive sentiment taking hold of the market is reflects in how well some marijuana stocks trade.

So far in 2021 cannabis stocks are moving up and seeing overall bigger gains. For this reason, many new and seasoned investors are looking to get involved and make some money. The cannabis industry is one of the fastest-growing markets in the world that is continuously expanding. The 2 cannabis stocks below are examples of when the sector is trending it resonates well with how marijuana stocks can or will trade.

Pot Stock Watch List This Month

  1. Green Lane Holdigns Inc. (NASDAQ:GNLN)
  2. Liberty Health Sciences Inc. (OTC:LHSIF)

Green Lane Holdigns Inc.

Green Lane Holdigns Inc. has been of the many marijuana stocks trying to climb higher in a volatile market. Back in 202 GNLN stock saw its price fluctuate quite often. This price fluctuation allowed for good entry points before GNLN stock had a spike in trading. Like many marijuana stocks, 2021 gave the cannabis market a nice push to start the new year. With Green Lane 2021 was no different.

In the first 2 weeks of the new year, GNLN stock shot up 25 percent in trading as it was starting to dip from this point. Even though Green Lane closed out the first month of the new year with a drop from previous highs in January the following month was a different story. Currently GNLN stock in February has been able to recover from January’s dip. 

The company has been able to even reach higher highs than last month. Within the first trading week of February, GNLN stock saw gains of 27 percent. This was a much-needed momentum booster to help the company recover from its trading at the close of January. So far for in February GNLN stock has had a nice upward push in the market showing over 60 percent gains in trading. This current momentum has signaled to investors that Green Lane may be a marijuana stock to watch in 2021.

[Read More]

Liberty Health Sciences Inc.

Liberty Health Sciences Inc. has been an interesting cannabis stock to watch. Like many other cannabis businesses, it’s going to take more than a pandemic to stop the company from expanding. Back in January, the company announced that it will be opening a new location adding to its current portfolio of dispensaries. The Company plans to open two more dispensaries by the end of February 2021 with much more in the works.

Although in 2020 LHSIF stock traded mostly sideways with subtle spikes in trading the new year has provided a strong push in trading. Starting from December 21st LHSIF stock started to bounce and began to climb in the market. From the 21st to the 31st of December LHSIF stock shot up 90 percent. For those who held their position until this point, they made a healthy return on their investment. Pushing into the new year the company was able to sustain its market momentum and keep pushing up in the market.

In the first 14 days of trading of the new year LHSIF stock has a 13 percent increase in trading. The remainder of January’s trading resulted in a small dip. Yet overall gains for the first month of 2021 for LHSIF stock was an increase of 8 percent. This was a subtle push that helped the company sustain its current market position. Now that we have entered February LHSIF has continued to trade up in the market. Currently for the month of February LHSIF stock is up over 25 percent. If the company can continue this momentum it would intrigue more people to keep an eye on this marijuana stock.

The post Are These Marijuana Stocks Built For Long Or Short Term Success? appeared first on Marijuana Stocks | Cannabis Investments and News. Roots of a Budding Industry.™.

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By: Daniel Chase
Title: Are These Marijuana Stocks Built For Long Or Short Term Success?
Sourced From: marijuanastocks.com/are-these-marijuana-stocks-built-for-long-or-short-term-success/
Published Date: Thu, 11 Feb 2021 13:30:07 +0000

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Price to Earnings Ratio Defined (P/E Ratio Formula)

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Trying your hand at the stock market? Chances are, you’ve come across the term “P/E ratio”. If you’re like many who are new to the stock market, you’ve looked at this phrase and asked yourself, “What in the world is that?” 

P/E ratio, otherwise known as the price-to-earnings ratio, is a formula that investors use to determine the value of a company’s share. It is one of the most common formulas used to determine the value of a stock. The formula compares the price of a company’s share to the earnings per share (EPS) of the company in order to determine how much an investor is paying for $1 of the company’s earnings. Let’s take a deeper dive into the P/E formula. Use the links below to jump ahead to a section of your choosing. 

P/E Formula and Calculation 

First thing’s first: let’s learn the price to earnings ratio formula and how to calculate it. The price-to-earnings ratio formula is as follows: the price of a single share of a company’s stock (What is a stock?), divided by the company’s earnings per share (EPS). The ratio of these two variables will tell you exactly how much an investor is spending for a single dollar of the company’s earnings. 

Finding the cost of a company’s stock is extremely simple. In order to find the price of a single share of a company’s stock, all you need to do is enter the company’s stock ticker symbol (the series of characters that represents that company on the stock market) into a finance website, such as investor.gov. You’ll quickly find the current cost for a single share of that company’s stock. Google also keeps an up-to-date Market Summary for the prior day’s stock market, so a quick Google search will often bring exactly the answer you’re looking for. 

Determining a company’s earnings per share (EPS) can be a bit trickier. Earnings per share are broken down into 2 categories: trailing earnings and forward earnings. Trailing earnings, often shortened to TTM, are the company’s core earnings over the trailing, or prior, 12 months. This number is the profit that the company has generated over the past 12 months of business. Remember that we’re talking about the net income of a business, rather than the gross income (Need a refresher? Learn more about gross income vs net income.). P/E ratios calculated with trailing earnings are known as the trailing P/E (P/E TTM). Forward earnings, on the other hand, are the predicted earnings that the company will generate over the next 12 months. P/E ratios calculated using forward earnings are known as the forward P/E. Both types of earnings are divided by the total number of public shares on the market in order to generate their EPS. More on this later. 

Let’s try out an example. Say you’re looking to determine the trailing P/E of a fictional company AlphaBet Corporation, known on the stock market as ABC. Their share price is currently at $50 per share. Their trailing earnings per share is $5. Divide the $50 per share by the $5 EPS, and you’re left with a P/E of 10. This means that investors are paying $10 for every $1 in earnings per share. 

Understanding P/E Ratio 

So, ABC has a P/E of 10. What does that mean for you? 

In the most general sense, the lower a P/E ratio, the less an investor is paying for each dollar of a company’s earnings per share. A higher P/E ratio means that an investor is paying more per EPS. But, unfortunately, determining which stock to buy isn’t as simple as “look for the lowest P/E ratio”. 

It is imperative to remember that everything on the stock market is relative. “Good” and “bad” numbers are different for each and every industry. An electronics company and an automotive company are functioning in two vastly different landscapes. Therefore, in order to determine what is a good price to earnings ratio, you’ll need to understand the landscape of P/E ratios in the industry. Look at similar companies’ P/E ratios to better understand the relative value of your company’s P/E ratio. If ABC’s price-to-earnings ratio seems extremely high as compared to other companies in the industry, it may be an overvalued stock. On the other hand, if it seems extremely low as compared to other companies in the industry, it may be a very valuable stock. 

Let’s try another example. We’ve already determined that ABC’s price is $50 per share, earnings are $5 per share, and P/E is 10. A competitor, DOG, also has stock for $50 per share. Their earnings, on the other hand, are $2 per share, making their PE 25 (50/2=25). An investor would pay $10 for every $1 of ABC’s earnings per share, but they’d have to pay $25 for every $1 of DOG’s earnings per share. With a better understanding of the landscape, we can see how ABC sits relative to its competitors. 

A company’s price to earnings ratio may also be looked at relative to itself. Remember those two types of earnings we reviewed earlier? We can compare a company’s trailing P/E to their forward P/E to better understand the value of a stock. A company with a high trailing P/E ratio may have been rather unprofitable the prior 12 months because theywere preparing to ramp up business substantially, and took on a number of upfront costs. They may be expecting a boom of profits over the forward 12 months, leaving them with a substantially lower forward P/E. By reviewing these numbers in comparison to each other, we may see an opportunity for a long-term investment. 

Limitations of the P/E Ratio 

While the price to earnings ratio is certainly one of the most widely used calculations among stock market investors and analysts, it’s not a cut and dry way to determine a good or bad stock. It gives investors a good understanding of the value of stock in a particular moment, but it certainly has its short-comings. 

Just as the stock market is relative, it’s also in a constant state of fluctuation. It is re-evaluated and recalculated constantly. Why does this matter when it comes to the price to earnings ratio? Well, just look at the variables we use to determine the P/E ratio. 

First, we have the “price” of the price-to-earnings ratio: the cost of a single share of a company’s stock. Stock prices fluctuate every single day based on supply, demand, current events, and more. Typically, the cost of a company’s stock will be reported as the cost that it was when the stock market closed the prior day. Each time a company’s stock price changes, their P/E ratio will change. Certain companies may tend to have a greater fundamental volatility than others, leaving their stock price changing substantially each and every day. Even those with low fundamental volatility experience routine fluctuation. 

Next, we have the “earnings” in the price-to-earnings ratio. Both trailing and forward P/E ratios have their limitations. Trailing P/E can feel like the more reliable of the two numbers because it’s based on facts. We take their actual earnings over the prior 12 months into account. But, in many situations, a company’s prior 12 months may have little to do with their next 12 months. As mentioned earlier, a company may have spent heavy the prior 12 months in preparation to ramp up the next 12 months. The trailing P/E won’t show us any of that. The forward P/E, on the other hand, is based on predictions. And predictions are quite educated guesses, but at the end of the day predictions are still guesses. A company may fall short of their predicted earnings or blow completely past them. 

Looking to try your hand at the stock market? Don’t go at it alone. Consider opening an investment account with Mint. We believe that there’s no “one-size-fits-all” approach to investment. That’s why we offer a variety of investment partners, suited to each particular need. Let’s find the best to suit yours. 

The post Price to Earnings Ratio Defined (P/E Ratio Formula) appeared first on MintLife Blog.

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By: Mint
Title: Price to Earnings Ratio Defined (P/E Ratio Formula)
Sourced From: mint.intuit.com/blog/investing/price-earnings-ratio/
Published Date: Tue, 25 Aug 2020 19:37:02 +0000

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Will Marijuana Banking Be Apart Of Federal Cannabis Reform?

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The Cannabis Industry VS Financial Institutions

As marijuana stocks and the cannabis industry as a whole awaits federal cannabis reform the sector keeps trending. Now if the U.S. can federally decriminalize cannabis some analysts feel it may cause some cannabis stocks to rally. As well as many new doors will that can open. For one many new markets will look to join the U.S. cannabis industry. Furthermore, with federal cannabis reform, it could be the start of initiating a banking system for the industry.

Currently due to cannabis still being federally illegal banks can not take money from a cannabis-related business. From the time states started going legal, it has been an issue that has yet to be resolved. The cannabis industry is one of the fastest-growing industries in the world, especially in the United States. Politicians have been working to pass various pieces of cannabis legislation.

The one bill that would be beneficial to the industry is known as the SAFE Banking Act. This bill would allow banks to accept money from cannabis-related businesses. On March 7, 2019, the bill was introduced to the U.S. House of Representatives by Ed Perlmutter and was introduced to the Judiciary and Financial Services Committees. Back in 2019, the Financial Services Committee voted 45 to 15 to advance the bill to the full House.

The SAFE Banking Act provisions were included in the HEROES Act COVID-19 relief bill passed in the U.S. House in May 2020. They were again included in a bill approved by the house 214–207 in October. A push to include the SAFE Banking Act provisions in the end-of-year COVID-19 stimulus failed, though hope remained it could pass in 2021 if reintroduced.

How Will The Cannabis Industry Work With Banks

When it comes to any business you can think having startup capital is important. Now not every person with money is willing to invest in a new venture which makes finding that more of a task. Especially with cannabis-related business and right now banks are no help. For a business to acquire a line of credit or some type of lending your business must be able to have some type of financial record.

This usually tells banks and lenders how good you are at paying things back and how reliable you are to do so. The bigger obstacle for cannabis businesses is how do you show you are trustworthy with no credit history. Once again this due to financial institutions not working with cannabis businesses. Let’s look at a few steps to help jump over some red tape.

First, you should start a new business that is a separate company from your personal credit. This will help when it comes time to do your taxes. The second step to take is you need to register for your EIN number. Next thing to do is open a new bank account and make sure you can show that you have continuous income which shows financial stability. Again with banks not accepting cannabis money the last step may be next to impossible to do.

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Will Cannabis Banking Actually Happen?

The way financial institutions offer other industries various banking options is not the same for the cannabis industry. Although there is some grey area with cannabis and banks yet most banks won’t offer services for how high risk the industry is. This leaves many cannabis businesses left out from what other traditional retail businesses would have. Look past the risk banks also look at taking cannabis money as to much work. This would result in following regulations and keeping data on all money. This process has been established by the Bank Secrecy Act of 1970. Also, working with the large amounts of cash cannabis businesses generate may affect how a bank can operate.

With this roadblock between banks and cannabis money, it shuns cannabis businesses from establishing a form of credit. This issue alone is why the industry operates only in cash with very few places to keep it. Also, this issue can do much harm to future relationships with other companies and businesses. If a cannabis business can not establish a credit history no lender or bank can help. That’s why it’s important to have an industry as big as cannabis have some form of credit being reported to credit companies. This will tell other lenders and banks that a particular business is profitable enough to pay back any loans.

What Will The Future Of Cannabis Banking Become

It’s wild to think that an industry that is generating a high volume of cash is being blocked from showing the reliability needed to secure lending. Some feel if the cannabis business can earn the trust of financial institutions by being transparent with its earnings. This may be a step to banks feeling more comfortable with working with a cash-intensive business. Hopefully, with federal cannabis reform, it will help push cannabis banking in the direction needed to help out the industry.

The post Will Marijuana Banking Be Apart Of Federal Cannabis Reform? appeared first on Marijuana Stocks | Cannabis Investments and News. Roots of a Budding Industry.™.

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By: J. Phillip
Title: Will Marijuana Banking Be Apart Of Federal Cannabis Reform?
Sourced From: marijuanastocks.com/will-marijuana-banking-be-apart-of-federal-cannabis-reform/
Published Date: Tue, 09 Feb 2021 18:34:56 +0000

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