P2P lending can potentially assist investors earn extra income and diversify their portfolios.

P2P investing appeals to many people who are searching to make their financial savings work for them. When all goes well, P2P investors might also enjoy a greater return on their cash versus what they would acquire in a high-yield savings account, certificate of savings (CD), or different investments.

Becoming a P2P investor starts with applying to open an account on a P2P lending platform. If you are approved, you deposit cash that will be loaned out through the platform to qualified borrowers. You can review loan requests (along with applicant risk grades) and pick the applications you’d like to approve, either offering the full loan quantity or a portion of it.

Through the platform, you can track your earnings from principal and interest as your borrowers make their payments. You can cash out your earnings (you’ll possibly have to pay taxes on them) or reinvest.

Keep in mind that there’s risk involved, as with any investment. First, there’s no guarantee your borrowers will repay as promised (whether the platform goes after delinquents, and to what extent, is something to check out in advance). There’s also a possible hazard that the lending platform itself could shut down. In either case you might lose a great portion of your investment,