How to Receive Investment Returns by Lending Money, Essay Example

Lending money with the aim of getting it back with interest is a very viable investment option people can take to improve their economic status and, hence, living standards. Such lending can be done through the use of lending clubs or an individual can decide to go at it alone. In such a case the individual has to devise ways of managing his/her landing activities in the same way lending institutions do.

The first step the investor should take is setting his/her lending rate as well as the terms of the lending. The lending rates and terms should be reasonable so that not to discourage the would-be borrowers.

The next step is to determine or decide on the people money would be lend to. Before lending money to anyone it is important to find out his/her creditworthiness or ability to repay back the money borrowed together with the interest. However, an individual does not have the ability to examine all clients with the view of finding out who is creditworthy. Therefore, it is important that such an investor deals with a few people he/she trusts and is able to handle.

After setting out how to handle all the activities involved in the money lending process, investor can now start lending out money to willing borrowers, who fall within the category or categories set out by the investor. Whenever in doubt of the creditworthiness of the borrower, the investor should seek more prove from such a borrower in order to determine whether he/she has the ability to repay the loan back. Conversely, the borrower can surrender an item as a security of proof that he/she will repay the loan.  The borrower should state the number of for repaying the loan to facilitate calculation of the interest payable.

Handling debts can be a tiresome and cumbersome activity. To some extent it can be very challenging and therefore investor should consult the specialists, who have previously dealt with this kind of lending. All in all, it is important that the investor comes up with reasonable rates and terms as well as decides on the kind of people he/she is going to lend to before stating the activities.