5 Ways to Spread Your Risks When There Aren’t Enough Loans

It's all very well us telling you to spread your risk – diversify – across dozens or hundreds of loans, but what if a P2P lending company you're interested in doesn't have enough loans? Other than walking away, I think you have five choices:

1. Spread your risk by investing over several weeks, rather than at once. If you go further and lend regularly, every month, then you don't just diversify into different loans but into different time periods. Some years of loan issue are more likely to default, like loans taken out in 2007 or 2008. Lend at different times and the risk and impact of bad times is reduced.

2. Lend through more than one P2P lending company. Then your risk is diversified not just across different loans and borrowers, but across different loan markets too.

3. Walk away and find another P2P lending company. The simplest option.

4. Lend part of your money and invest or save the rest in index trackers, savings accounts or your own property. You could read more on that in The Investment That's Better Than P2P Lending.

5. Buy loan parts on the secondary market. A “secondary market” is where you can buy and sell existing loan parts. (The stock market is also a “secondary market” where you can buy and sell shares of a company after the initial public offering has taken place.) Many P2P lending companies allow you to do this, but watch out that you're getting a decent return, since you might get less than the original lender – although you can also get more. Just like the stock market.

Watch out that you don't spread into multiple loans by the same borrowers. Some borrowers take out two or three P2P loans and not always through the same P2P lending company.