However, online investing and lending comes with its fair share of risk.
Here are some pros and cons of investing with online lenders and the impact the process is having on the business world….
Online Investing Pros
More and more investors are creating relationships with online lenders and delving into the world of investing. Why? Well, there are a number of financial benefits that go along with the practice of online investing.
- Execution – Unlike traditional investment transactions, online investing involves fewer formalities, which makes the process much faster. Investors can find lenders online, vet them quickly, and decide how much of an investment they want to make within a matter of minutes. This allows for faster investment deals with a wider range of lenders.
- Cost – Online lending has fewer fees and better interest rates than bank lending. Although this doesn’t sound like a benefit for online investors, it actually is. Because costs are so low, lenders process many more transactions per day, which results in more profit for both the lender and the investor over time.
- Convenience – Online investing can be completed from the comfort of the investor’s own home. There is no traveling required. This gives investors the opportunity to make a number of investments each day and increase profits across a stronger, more diverse investment portfolio.
Online Investing Cons
As the following article looks at, while the pros mentioned above are attractive, investing with online lenders requires careful consideration with each transaction. There is more room for error with online investing as well as a handful of other risks.
Things to consider:
- Little to No Support – Online investing doesn’t necessarily have a go-to protocol like traditional investing does. This means there is little support in the way of resources and investment advice. Inexperienced investors can end up losing money jumping into an online investment too quickly.
- Security Threats – There are a variety of security threats when sharing personal information online. From information breaches to crippling viruses, online investing comes with more security risks than traditional investing. This is especially the case because financial documents and personal information are involved.
- Fraud – Fraudulent lenders are also a growing concern for online investors. There are ways to vet investment candidates, but online investment opportunities are growing at a rapid rate and not all lenders have lengthy backgrounds. This makes it easy for investors to choose business partners that aren’t exactly reputable.
Impact of Online Investing on the Business World
Traditional investing through banks, venture capitalists, and other physical locations will always be the norm. However, online investing and lending is quickly making a name for itself in the business world. As a result, businesses and borrowers are able to secure business loans that were once unavailable due to strict lending practices.
With more businesses getting loans faster and cheaper, online investing is creating a more versified and competitive business environment.
When it comes to online investing, it’s plain to see that there are a number of pros and cons to consider.
About the Author: Adam Groff is a freelance writer and creator of content. He writes on a variety of topics including investing practices and small business.