The best way of generating passive income is off course to invest your money. But where to invest? There are a lot of opportunities, such as stocks, bonds, real estate, ... or, how about P2P. Here I want to introduce you to the P2P lending websites Bondora and Mintos. P2P, or peer-to-peer, means that you borrow money to people who are willing to pay interest on that money. The P2P market keeps on growing and so do the chances of investing your money with a nice return.
Bondora uses the product "go and grow", where everything is done automatically. Here, you just send your money to your account and Bondora gives the money to the borrower. The return is set to be 6.75 %. The interest from the credits is higher than 6.75 %, but the additional money is used to keep the product liquid and prevent loss due to credit-defaults. You can withdraw your money anytime because the money is in the product and not in a specific credit. A minor downside is that withdrawing your money costs 1 €, so if you want to cash out a passive income every month, then you need to invest larger amounts. When investing 5000 €, you get about 30 € per month, and can cash out 29 € per month. If you invest 100 €, then you get 6.75 € within a year and can cash out 5.75 € every year. With my referral code you get additional 5 €, so you can test Bondora and be sure to get a little return. You can invest as little as 5 €, but for a start I recommend to invest 100 € to 500 €.
Mintos is a marketplace for credits. Here you can find a lot of lenders who need your money. You can invest with different currencies, such as Euro, Ruble or Zloty. Mintos has similar products as Bondoras go and grow, but I recommend to define your own investment strategy by using the autoinvest function. Here, a credit company sets up the credit and you buy a small portion of this credit, usually 5 to 15 €. The remainder of the credit will be bought by other investors; so you will be invested in a lot of credits, which gives you a good diversification. With autoinvest you get a list of options on how to distribute your money to the lenders. One important option is the "Buyback Obligation". This means, that if a credit is in default, the company which setup the credit on Mintos has to buy the credit back from you. This way, even if the lender doesn't pay his credit, you will still get your money back (except, if the company goes bankrupt). With the interest and the paid back credits you will generate a constant cash flow, that you can use as a passive income. I set my autoinvest to return an average interest rate of 12 %. If you're overwhelmed by the options feel free to ask me for help by leaving a comment or a mail.
There are a lot of other Websites for P2P lending; some are similar to both, some give higher interest rates (which results in a higher risk), some with focus on specific kinds credits, ..., but I think, that these two are the best options for getting to know P2P.