Doing Some Good in the World with Micro Loans
When it comes to loans, many people think of money that they are borrowing. They rarely think that they can lend money to make money. But, ultimately, isn’t that how mortgage lenders and other creditors get paid? They make their money on the interest garnered from lending money. And you can do this, too.
I’m not talking about investing in mortgages on the secondary market (which is practically bust now anyway). I’m referring to what are known as micro loans. Micro loans are small amounts of money (as little as $25) that you loan to people who need it in third-world countries. It may seem like a risk, but with a payback rate that is about 99%, you will find that it’s not as risky as it seems.
Here’s how micro loans work. You find an organization like Grameen Bank or Kiva that loans money to entrepreneurs in poverty-stricken nations. They don’t need much to get going. Then, as the loan is paid back, you get your money back, with something like 7% interest.
Both parties benefit. You help someone (and feel good about it), and you make money (even if the rate of return might be a little tame). The entrepreneur gets a shot at a better life. And the interest rate he or she (most recipients of micro loans are actually women) pays is much, much lower than the predatory rates charged by lenders in third-world countries. You can see how this is the classic win-win situation in the world of loans.
Investing isn’t just about stocks and bonds. Any way that you get your money to work for you is considered an investment. And, with ethical investing becoming more important to more people, this is one way you can take advantage of making money in an ethical way.
Tags: doing some good, micro loans, ethical investing, home equity second mortgage,
mortgage lenders, mortgages secondary market, how microloans work
