Go with the P2P flow

For investors looking for an income stream, peer-to-peer lending provides an attractive alternative to regular banking products

- ELIOT HASTIE

Inflation has moved from the halls of banks and into the backyards of everyday Australians. It's brought with it higher interest rates and a rise in the cost of living. Unfortunately, it's unlikely to get better quickly. To make matters worse, salaries aren't keeping up. While it's true that wages are growing at their fastest rate in nearly a decade, it's not enough to keep pace with the consumer price index (CPI). But what can you do about it?

There's no shortage of advice that will tell you to pick up a side hustle, but you want to be able to enjoy your well-earned time off. Instead, look for a way to make your money work for you through passive income strategies.

An example is peer-to-peer lending (P2P). It is regulated by the Australian Securities and Investments Commission (ASIC) to ensure the protection of investors and borrowers. The leading P2P platforms include SocietyOne, and Plenti.

In its simplest terms, P2P lending cuts out the middleman and lets someone needing a loan borrow money directly from an investor, rather than going through a bank or other lending platform. It's also known as social lending or crowd lending.

The system initially was a way to offer credit to people who may otherwise be rejected by conventional institutions. But it's grown in its use cases, as the loans can be used for virtually anything.

P2P platforms act as a conduit between the two groups and set the rates and terms for the transactions. The advantage for investors is that their cash is likely to get a better return than it would from a traditional savings account. There is certainly the potential to generate a passive income stream as your loans are repaid. Despite that, the growth of the market seems to have stalled in Australia.