Microloans and Passive Income

Anyone that has ever been in debt has seen how lenders can make money.  However, we often see the level of entry for a lender is far beyond our means.  Never fear, microloans are here.  This investment instrument allows us to step into the loan side of the equation with less than a hundred dollars.

Fundamentals of Microloans

This form of saving/investing involves contributing your funds to a pool of other investors.  The funds are then used to provide short-term loans.  Your money offers you a percentage of the overall loan and thus, a cut of the profits as well.  Your money is going to be tied up in the loan until it is paid off. Therefore, this is not a valid short-term investment option.

A Better Long-term option

There is more risk in microloans than there is with some of the other options mentioned in this episode.  You can compare against Certificates of Deposit (CD) and high interest, long-term savings accounts.  While the results vary, it is not uncommon for microloans to return five to ten percent interest on the investment amount.  Of course, there is a risk of losing all of your money.  A loan is a form of investment that does require some upfront research to help you craft a good strategy for your situation.

Getting Started

There are a lot of details to microloans that are not very exciting.  It is essential to know them.  However, I am not an expert and may not convey the right information for you.  That being said, check out some of the microloan sites for more details.  Even if you are not interested in this form of investing, it is worth your time to learn how they work.

Prosper

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