Microfinance

Microfinance is an unusual way to invest your money and really became widely used with the invention of the internet. Microfinance is where you can either gain a loan by asking many members of a community site for small amounts of money each or you can lend money to someone only giving a small amount of money to them. Sites have been set up to use cope with this function.

The idea is that an investor can put money into the website and then choose where the money goes. Its best to spread the money across several people wanting a loan and its also best to see how much you will be gaining from each person. The website is like a bank so usually if the user can't afford the payments then collateral is often put up. Like with most things there is a risk factor in investing but if successful you could be earning impressive amounts of interest on small investments.

For people wanting to take out a loan, the site will often check your credit history and see whether youe eligible to take out a loan and if you are able to afford the repayments. Then you will get to choose the amount of money you wish to loan and the interest you wish to put on it. Too low and few people would want to invest their money with you and too hight and you may not be able to make your repayments.

The best use of Microfinance I have seen is a website called MicroPlace where you can invest your money in developing countries to support local buisnesses while still earning interest.


The best advice I can give you for lending and borrow money through Microfinance

1. Borrowers: Find the right amount of interest that you will be able to pay back.
   
2. Lenders: Only lend small amounts of money to begin with.
   
3. Borrowers: keep up to date with your payments.
4. Lenders: Look for the best interest rates.
   
5. Both: Find a reputable site to trade your money in.