When you’re looking to invest your money, it’s natural to want to know the risk of your investment. While most P2P lending platforms operate safely and the loan originators can generate the stated interest rates, there are, unfortunately, many scams.
In this article, we’ll share tips on avoiding scams in the P2P lending niche and help increase your data security.
How Do P2P Scams Work?
P2P platforms usually offer high rates of return, which make them attractive to a wide range of investors. Unfortunately, that also makes them a juicy target for scammers. With P2P lending, there are two primary ways to invest:
- You invest in loans that loan originators already fund, so you’re providing funding to the loan originator.
- You loan money directly to individual borrowers.
The second way usually bears more risk, as the information you have at hand to complete a background check on the borrower is often limited. In contrast, many loan originators have a track record of their business activities that you can check, such as annual reports.
One important thing to note is that when you invest your money on a P2P lending platform, and they suddenly stop withdrawals and don’t respond to your messages, there is a high possibility that your money’s gone, and you were scammed.
However, whether this was planned from the beginning because the Ponzi stopped working or the company ran out of funds due to mismanagement will likely remain unclear.
How to Avoid P2P Scams?
Before investing your money on P2P platforms, you should take some precautionary measures. Here are some things to do and look out for:
- Complete background checks on the platform – How does it make its money? Who are the people operating the company (CEO, CMO, CFO etc.)?
- Research the loan originators that offer loans on the platform – Are they profitable? How long have they been in business? What is the prevailing opinion on them in the investor community? Where else are they involved?
- If the sign-up process is too easy and identity checks are almost non-existent, it’s a telltale sign that something is wrong. Finance companies are usually required to verify the identity of their customers/investors.
- Does the platform require a high initial investment, like 5000 EUR? If you’re looking for high rates of return in P2P, then there are alternatives with lower capital requirements.
- No one from the company answers your questions via the official channels, or responses are in bad English – not good!
- Review the terms and conditions and look out for anything that may be suspicious, like small withdrawal limits, long loan extensions, unjustified termination of accounts or binding changes of the T&C without needing to inform investors
Discern Scamming Attempts
Scams are not just limited to the P2P platform itself. It could also be that a scammer is posing as a representative of another platform, such as Lendermarket, and wants you to give out your security details or make a transfer to another account.
Here’s how you can stay safe within the P2P industry.
Lendermarket representatives will never:
- Call you and ask for your personal information, login data, or password.
- Call or message you in a private email and urge you to send money outside the platform.
- Use a third party to contact you.
- Ask you for your Two-Factor Authentication (2FA) code
- Ask for credit card details or ask you to deposit money to a crypto wallet
Lendermarket representatives will:
- Contact you directly via email if there’s an issue with your account.
- No WhatsApp messages or calls are needed.
- Always use email addresses that end with ‘@lendermarket.com’ when communicating via email.
Five Tips to Strengthen Your Data Security Today
To stay safe on the web, whether with your account on a P2P lending platform, your bank or any other service, here are five tips to bear in mind:
- Use Two-Factor Authentication (2FA)
With 2FA, your account needs a second piece of data in addition to your password to complete the login. This could be a code generated with a 2FA app or received via call/text message. That way, a hacker or scammer would need access to your mobile device and your password to gain access, making it much harder for them.
- Use Strong and Unique Passwords
You’ve likely heard this a thousand times already, but that’s because it’s essential – use unique and strong passwords for every website. This means a password of at least eight digits with numbers, special characters, and lowercase/uppercase letters. If you can’t be bothered to remember all the passwords, use a password manager.
- Complete Virus Checks
Regular checks for viruses and malware with antivirus software will help keep your PC and mobile device safe. If your software detects a threat, make sure to follow the advice on how to remove it.
- Keep Your System Up-to-Date.
Updates for your operating system often include new security features. Various security issues are found daily, some more threatening than others. Through updates, the developers eradicate these threats, so it’s essential that you keep your system up-to-date.
- Use Common Sense
The safest device is only as secure as its operator, so use common sense when using any device. It is often shady if you find an offer on the internet that’s too good to be true. Also, if you get any emails stating there are problems with your account, visit the company’s website via a secure URL and look for a way to contact the company from there. NEVER answer these emails or use the proposed contact method.
Scams are, unfortunately, everywhere. Scammers will try to steal money if people don’t do their due diligence and are too careless with their information. It doesn’t take much to stay safe, and it’s often simple, but you must implement the measures mentioned in this article – especially the part about strong passwords.
We hope this article can help you avoid scams in future and keep your accounts safe!