The Sharing Economy Can Make You Money

Taxation of this Sharing Economy:

The Internet, along with its rising social media, has created some very new opportunities for people to earn extra cash. This ‘sharing economy’ theme is defined as this – Putting up some unused resource either for sale or for rent (like a skill, parked vehicle, or empty room). This might seem a bit minor at first, but according to one statistic, this sharing economy actually represents as much as a $110 Billion dollar market.

One community marketplace for finding or listing or booking lodging all over the world, is Airbnb. This is done on the Internet and by mobile phones. They carry more than 500,000 listings for 33,000 cities, in 192 countries worldwide.

The Benefits:

If a taxpayer rents out a property for less than 15 days a year, they don’t have to report that income or the expenses on their tax returns. This enables them to rent out property for short periods of time with NO TAX liabilities. In order to qualify for this exception, all you have to do is use your home personally for over 14 days, or for 10% of the overall number of days, that you rented it out to other people for a fair price.

Another Investment Possibility: Prosper and LendingClub

If you are not someone with a spare bedroom or car that you can share, but you have available cash sitting around, you can make some money this way. Peer to peer lending through sites like Prosper or LendingClub gives you the opportunity to earn some extra cash. They allow individuals to either lend or borrow money, with a certain degree of anonymity, using interest rates that are credit score based. Risk levels are also factored in. Both of these sites will allow investors to lend out their money in increments as low as $25.

Understanding Peer to Peer Lending

Peer to peer lending has boomed since its advent, as it has provided debtors a simple means of acquiring unsecured loans without having to pay high interest rates as with credit unions and local banks. Companies such as Prosper, Virgin Money, and Lending Club offer interest rates that could for as little as 6 percent, which is very convenient that most borrowers refinance personal loans and credit card debts into a P2P loan. If you wonder how these companies manage to offer such low interest rates even if the borrower does not have a good credit rating, it’s because they remove middlemen through their large margins and overheads.

Many peer-to-peer lending marketplaces employ the eBay design, which allows lenders and borrowers to agree on the loan without any third parties. The loan requests of borrowers could be listed through an online platform, where the desired amount, along with the loan duration and interest rate, is specified. After filtering numerous requests from borrowers, lenders then place their bids on loan listings matching their conditions for allowing investments.

Borrowers could create online profiles, where they could present their strong points financially and monthly expenses or incomes. There are a lot of lending sites that base the creditworthiness of the borrower through determining credit scores, analyzing DTI (debt-to-income) ratios, and calculating stability scores.

Registering with peer to peer lending sites is very simple and fast. You could request for loans for reasons ranging from student or business loans to travelling or marriage. In order to be funded of your requested loan, you should give justification to why you need the loan, which would be best backed by demonstrating your reliability or stability, although you could still be discreet and alter your profile’s privacy settings if you think it’s a little personal.

Peer to peer lending can provide you with several advantages for your hard-earned cash than banks and other impersonal institutions. In addition, this process makes the risk quotient associated with unsecured lending through distributing money to a series of borrowers. Clearly, markets with less risk quotients provide little returns, while those with higher risks offer better returns.

For people who find the traditional transaction processes of banks tedious or those who do not want to go through the legal responsibilities set by financial institutions, peer to peer lending may be a better choice to opt for, as it’s quicker and easier, and does not require you to pay back huge interests.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from savings to mortgages to Buys insurance deals online.