This post is also available in: Spanish
Amongst all the online investment platforms available today, European peer-to-peer lending sites are the ones which offer the highest returns. That, of course, comes with increased risk. Let’s have a look at how P2P loans work and which are the best European peer-to-peer lending sites in 2020.
Why the focus on Europe? Simply because I am European and currently based in Europe. Most US lending sites, as well as some UK sites, prohibit European citizens from investing, so this post focuses exclusively on those platforms that are available to all European citizens.
Another reason for focusing on Europe is that currently, the European platforms offer the highest returns when compared to other platforms in the United States or Asia.
The History of Peer-to-Peer Lending
The peer-to-peer technology concept was first popularised by music file-sharing networks such as Napster, eMule, and most recently torrents. What peer-to-peer means is that we’re removing the intermediary and regular people are sending files to other regular people.
Applied to peer-to-peer lending, it means that we are lending money to other people who need it for something specific. There is no need for a bank to get involved because the money is flowing directly from loan providers to the people requesting the loans.
The traditional way of getting loans was to go to a bank, describe why you needed the loan, show your assets and submit an application. You then had to wait days or weeks until you receive a decision from the bank. They would offer you the terms, including probably the most important factor which would be the interest rate.
After the financial crisis, many banks became much more restrictive in who they give loans to, especially in certain countries. This left a lot of people and businesses in dire straits as they had nowhere to go to in order to obtain much-needed capital to make important purchases or investments. This also created a situation where many investors in Western Europe (e.g. Germany, UK) were flush in cash, and on the other hand, you had people and businesses in Eastern Europe (e.g. Latvia, Lithuania, Georgia) who were suffering due to the difficulties in obtaining financing.
P2P platforms solved these problems by providing an alternative to banks. Investors now have no borders and can easily invest in loans outside of their countries at very good returns, because there is so much demand. In this way, everyone is a winner. The platforms themselves take a cut when loans are re-sold on the secondary market.
Is P2P Lending Growing in Europe?
P2P lending volume is growing year on year in Europe and globally. You can check out my post on where to find statistics on the P2P lending market, but even without checking any stats, the growth is quite obvious to those of us who have been investing in P2P lending for the past five years or so.
When we talk about growth, we need to consider both the actual lending volumes and also the confidence and confort of investors when considering this asset class for investment.
According to a survey by Robo.cash, 64.9 per cent of European P2P investors have full confidence in P2P lending. Remarkably, 52.3 per cent of the respondents mentioned that P2P loans take a considerable share of their investment portfolio – over 25 per cent.
The level of confidence in P2P lending is also observed in the distribution of funds in investment portfolios. It’s no secret that most investors look for diversification by investing in various assets – stocks, bonds, cryptocurrencies etc. It’s quite telling, then, that 52.3 per cent of respondents said that investments in P2P loans take more than 25 per cent of their portfolios.
While it is a newer class of investment, there is no doubt that it is growing at an increasingly rapid rate, so it’s well worth understanding how things work, even if you’re skeptical at the outset.
How European Peer-to-Peer Lending Sites Work
Typically you will see different kinds of loans, some with no guarantee and others with some kind of guarantee. For example, if the loans you invest in have BuyBack guarantee, then the highest risk is for the P2P lending platform to go bankrupt, and that can happen because of many reasons – bad management decisions, competition or scam.
Peer-to-peer platforms service the loans and receive payments from the borrowers. Then the received payment is divided proportionally according to the amount of investment between all investors that have invested in the particular loan.
As soon as the borrower whose loan you have invested in repays his loan, you will start receiving payments of both the principal sum and the interest, for the investment period. They will be automatically transferred to your account. You can reinvest the received money in any available loans or request a payout directly to your personal bank account.
Each loan, has a specific date of repayment, so the investor will receive money in his account according to the regularity of payments made by each particular borrower.
Who Can Invest in P2P Lending Sites?
These European lending sites are open to all European investors, possibly even those outside of Europe in some cases. The only exceptions are the UK-based platforms, which are typically restricted to investors resident in the UK. Zopa is one such example. It’s been around since 2005 but is restricted to UK-based people.
The majority of platforms that are open to other countries are based in the Baltic countries. We have leaders such as Mintos and Bondora which have proven to be success stories, and now many other new entrants are fighting to get a piece of the pie.
Many of these platforms are available in more than one language, precisely to cater for the fact that in Europe people speak so many different languages and might not be comfortable investing their money if the site is only available in English. For example, my favorite lending site, Mintos, is available in English, Czech, Spanish, German, Latvian, Polish and Russian.
From my experience, at the moment in Europe the country with the most investors in P2P lending is Germany, leading by a long margin. German investors love P2P platforms. Germany is a country where people have a high purchasing power and they are looking for good returns on their savings, and hence P2P lending platforms are a great match for them.
What Returns Can You Expect from Peer-to-Peer Lending?
I think peer-to-peer lending sites are one of the best ways to earn passive income. The vast majority of investors are accustomed to using real estate for (mostly) passive income, but in my experience P2P lending can produce better returns while being more passive than real estate.
I’ve been averaging 11% returns per year over the past two years over the various platforms I’ve used.
You can read about my returns on each P2P lending platform in a separate post.
A common question I receive is about how much return is considered as the minimum acceptable.
My answer is that it is an ever-shifting minimum interest rate. What you want to do is compare any investment return with the risk-free interest rate.
The risk-free rate of return is the theoretical rate of return of an investment with zero risk. It represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. In theory, the risk-free rate is the minimum return an investor expects for any investment because he will not accept additional risk unless the potential rate of return is greater than the risk-free rate.
In practice, however, the risk-free rate does not exist because even the safest investments carry a very small amount of risk. Thus, the interest rate on a three-month U.S. Treasury bill is often used as the risk-free rate for U.S.-based investors.
At the moment it hovers around the 2.5% figure, so based on that and the risk of loan platforms (note that some carry much more risk than others), I would be looking for anywhere between 9 to 20%.
Let’s have a look at some of the best loan platforms in Europe, based on my experience investing over the past 4 years.
The Top European P2P Lending Sites in 2020
If you’re unsure which platform to invest in, one of the best things you could do is to check the platforms’ ratings on multiple channels. I’ve analyzed most of the platforms out there and taken a look at their Facebook, Trustpilot and Google scores, so here’s the list of the top four most reputable P2P platforms in Europe at the moment.
I also keep an eye on the market data on European P2P lending on a monthly basis, as this is an important indicator of whether any of the platforms are in trouble or whether they are in a healthy growth and profitability stage.
I’ve invested in all the platforms I recommend so I can speak from experience about each one of them.
Mintos
This is by far my favorite platform.
The interface is great; everything is understandable and you don’t need to fish around for data. You get a daily report in your inbox and you can also use the auto-invest functionality, which I always do.
Mintos has a solid secondary market which provides investors with liquidity. If you want to sell off your loans at any point, you can put them on the secondary market, choosing whether to apply a discount (making them more attractive) or add a premium (less attractive). If you want to sell quickly, applying a discount is the best way to do this.
The minimum investment in any single loan on the primary market is EUR 10, DKK 80, GEL 25, PLN 50 or CZK 300. There is no minimum for investments in the secondary market.
You have to be careful when setting the auto-invest parameters on Mintos. Check out the Mintos lender ratings post on Explorep2p as well as the Mintos loan scanner to see which are the most trustworthy lenders on the platform.
The income earned at Mintos is taxed for each investor based on the legislation of the respective country where the investor is a tax resident. Each investor can receive extensive information necessary for tax returns when logged into their Mintos investor account.
Companies can also invest through Mintos without any problem. There are specific documents that need to be provided in order to comply with AML legislation, but it’s pretty straightforward.
It’s been three years since Mintos launched, and they have turned an annual profit for the first time last year. In 2017, revenue increased more than four-fold to over EUR 2.1 million and net profit was EUR 196 000. This means a lot to me as an investor. It means that the company has a proven business model and won’t be disappearing tomorrow, as many others have done.
During 2017, Mintos experienced significant growth, making it the peer-to-peer lending market leader for continental Europe with a 38% market share according to AltFi Data. Since their establishment, they have exceeded EUR 660 million in cumulative investments by investors and they expect the number of loans funded to reach EUR 1 billion by the end of the year.
Over the past years Mintos have made considerable investments in technology, people and the marketplace, making the service even more convenient for investors. The number of investors has been growing in exponential numbers year on year. As an investor, this is reassuring, as I know I’m not alone using this platform, but I’m joined by tens of thousands of others like me.
Currently, Mintos has three offices employing people in Riga, Warsaw and Mexico City, with offices shortly opening in Brazil, Russia and South East Asia.
In 2018, Mintos is focusing on growing both sides of the marketplace by increasing investor demand, as well as loan supply from current and new locations by expanding the investment opportunities on the marketplace in Africa, Latin America, and Southeast Asia.
In 2018 Mintos also introduced risk ratings for loan originators offering their loans on the marketplace. The Mintos Ratings are on a scale from “A+” to “D”, representing the lowest and the highest counterparty risk respectively.
On Mintos, you can expect returns between 6% and 18%, and the minimum investment per loan is €10.
By signing up to Mintos through the link below and investing, you will receive a 1% cashback. I’ve been investing with Mintos for the past two years and have obtained great results, so if you have any questions before deciding whether to invest, leave a comment below and I’ll help you out.
Sign up to Mintos and get a 1% cashback on money invested
Grupeer
Grupeer offers both business loans and property development loans to invest in. All loans are protected by the platform’s BuyBack guarantee.
In the case of development projects, the real estate usually serves as collateral.
The most innovative part of Grupeer is the Stability Fund, which offers investors an opportunity to literally buy a square meter in a real estate property. This way the investor will be an owner of a fraction in the office building or any other development project which already generates income. After investing in this product, the client will receive a stable rental income from 4% to 8% yearly.
Iban Wallet
Iban Wallet is an online investment platform which aims to provide users with a daily paid fixed interest and immediate access to liquidity. They provide users with a hassle-free, simple experience which doesn’t need any active management on the user’s end but still provides higher returns than most similar products.
Iban accounts are investment accounts providing a fixed daily interest paid on a daily basis. Each account has a different interest rate. By opening an Iban account you can invest with a fixed interest of 2.5% AER. From there you can access any other investment products.
Iban only charges an early termination fee in the event you cancel one of the accounts ahead of its term and that fee shall not be higher than the sum of your interest earned.
You can add funds safely via your online banking directly in the app, by bank transfer or with debit/credit card.
You can start with only €1 in your Iban Account, which will earn you a fixed 2.5% AER the next day. You only need €1,000 if you want to invest in Iban One or Iban Market.
You can request to withdraw your funds from Iban account at any moment to your bank account, free of charge. This makes it similar to the Mintos product Invest & Access, although with Iban Wallet you’re investing in less risky loans since they’re all asset-backed.
Sign up with Iban Wallet today
Twino
Twino is my second favorite platform and works very similarly to Mintos. The biggest difference is that there are more loans available on Mintos.
With the help of TWINO, you can invest in unsecured consumer loans that have been issued by TWINO Group lending companies in 5 different countries (Poland, Georgia, Denmark, Spain and Russia).
TWINO does not charge investors any fees. TWINO makes its profit from the spread between the interest rate charged to borrowers and the interest rate offered to investors.
Currency for your TWINO account will be set depending on the currency of your first deposit. In case your first deposit is made in GBP, all operations under your account will be held in GBP. All other currencies will be converted to EUR and your account will operate in EUR. TWINO accepts all currencies. Payments received in currencies other than EUR and GBP will be converted to EUR. Payments received in currencies other than EUR and GBP will be converted to EUR by the Swedbank currency exchange rate.
TWINO offers support on weekdays from 9 AM to 6 PM EET via email, phone or Skype chat.
Within TWINO you will see a XIRR percentage figure, which gives you an idea of how your investments are doing. XIRR is the annualized internal rate of return, which shows your current portfolio yield at a given date. However, bear in mind that it takes into account only the received payments (deposits, withdrawals and interest payments), not the interest payments that you will receive in the future. XIRR and all interest rates are shown in annual terms. The XIRR number is reliable once the interest payments from all the loans in which you invested a deposit have been received.
Viventor
Viventor is a Latvian peer-to-peer platform that was founded in 2015, so it’s got a number of years in the market already. It is another loan aggregator like Mintos and has more than 6,000 investors for a cumulative investment of more than 80 million Euros.
Loan originators on Viventor pre fund the loans and then resell them on Viventor to us inestors. However they do keep at least 5% skin in the game for eeach loan.
Viventor currently works with over 15 loan originators in Lithuania, Poland, Spain, Bulgaria and Kenya. The biggerst number of loans come from Lithuania.
Returns are high on this platform, I have been able to obtain 15% plus returns and no defaults so far. IF you want to diversify beyond Mintos to protect against platform risk, Viventor is a good option.
October
With October you don’t lend money to other people but to small businesses. I find this site to be very well structured and organized. Their chat is very helpful if you have any questions or doubts about any of the investments.
This peer-to-peer lending site is available in English, Italian, French and Spanish. All European investors are welcome to join and invest.
The minimum investment per project is €20 and there is no secondary market. You can expect returns between 5% and 9% per year.
I’ve been investing with October over the past two years and have had very good results. The loan offerings are very well presented, and each loan is fulfilled very quickly, sometimes in a question of hours. This shows that investors really trust this platform and that that loan offers themselves are very attractive.
The businesses asking for the loans are very diverse and come from the four countries I mentioned. As an entrepreneur myself, I not only enjoy the returns from October, but I also enjoy reading about the various businesses that appear on this site and observing their financial statements.
One thing to keep in mind is that most of the loans are fairly long-term, with the shortest being for 2 years. I try to keep the loans I invest in between 2 and 3 years out of personal preference for shorter loans and higher liquidity in my portfolio.
When you click the link below to start investing with Lendix and invest your first €500, you will receive an extra €20 to invest on the October platform.
Start investing with October today and get €20 to invest
Other Peer-to-Peer Lending Sites
I’ve also invested in a few more European peer to peer lending sites, here are a few notes on them.
MyTripleA – Spanish platform that works well but has very little projects available. It is similar to October in the sense that you are lending to SMEs. They do offer guaranteed returns of 2% however if you’re happy with parking money for minimal but secure returns. Over the past year they seem to have had trouble finding suitable projects though, so I have stopped investing on this platform. It still is a good choice if you want a guaranteed return, albeit a low one of just 2%.
Bondora – One of the earliest European platforms, based in Estonia. I tried this out but wasn’t really excited about the returns nor the actual look of the site and the way things are presented. It seems to be passing through a rough patch with poor management decisions being the root cause. You will struggle to find loans with good returns and a buyback guarantee. I am still partially invested via Go & Grow and can only hope it will recover its previous top player status over time, perhaps with a change in management.
And here are yet some others that are on my radar:
- Swaper
- PeerBerry
- FinBee
- Ekassa
- Neo Finance
- Debitum Network
- Robocash
- Lendermarket
- Lenndy
- Crowdestor
- Wisefund
- Bondster
- Profitus
- Rendity
- Bulkestate
- EstateGuru
- Crowdestate
- Brickstarter
Is Peer to Peer Lending Safe?
We are living in an age of abnormally low interest rates and low inflation. That means that on the one hand there is a lot of demand for investments that offer good returns and on the other hand a lot of skepticism from people who don’t really know how these kinds of investments work.
You should always read reviews like this and investigate each platform yourself before deciding to invest. Ask other investors how they are doing, and have some interaction with the platform itself by chatting with them, phoning them or using their email support system. Check how they reply to you and use that to guide your investment decisions.
I have compiled a list of peer to peer lending platforms that I don’t trust, and I suggest you avoid them as well. But always do your own research and don’t rely on my opinion or anyone else’s.
I recommend reviewing your investments on a monthly basis so that if you see a bad trend developing on any of the platforms, you can take corrective action early. It is also a good idea to diversify as much as possible. If you have €10,000 to invest, you can choose to put €100 in each loan, so even if 2 loans go bad, you will still have €9,800 safe.
You will still receive interest on all the other loans so by the end of the year you will still be comfortably ahead. In the game of peer to peer lending you must be prepared for a small percentage of loans to go bad, that’s just the nature of how things work. Don’t get too frustrated about it when it happens, but rather make sure that your overall returns for the year are positive.
Obviously, don’t invest all your money in peer to peer lending sites. It is never a good practice to put all your eggs in one basket. I like to keep a healthy balance of stocks, cash, investments in other businesses, real estate, and loans.
All the websites I spoke about in this post are regulated (this isn’t wild west territory as in crypto), and one of the biggest selling points for these websites is how transparent they are. They are therefore incentivized to be transparent and show you historical data about their loan performances.
I would be aiming for 8% to 14% per year as a target earnings rate before tax when investing in peer to peer lending sites. Anything less than 8% and I would start to get worried and probably shift my investments elsewhere. This is because peer to peer lending is not as safe as investing in real estate, just to mention another asset class, so if my returns get that low I would prefer obtaining more safety through real estate investments.
How Do P2P Lending Sites Make Money?
As investors, we should always be very careful about where we invest our money, because as Warren Buffet likes to say:
“The first rule about investing is not to lose money”
Therefore, one of the things I always ask myself when someone offers me some opportunity, is:
“What’s in it for them?
We can, therefore, apply this question to the European P2P lending platforms that we’ve been talking about. How do they make money and what’s the role of all the parties involved in this business?
As we kn0w by now, P2P lending companies or platforms are the intermediaries between l
While in the early days, platforms charged fees to both lenders and borrowers; nowadays I’ve yet to come across a platform that charges any fees to investors/lenders, except on withdrawals or currency conversions. It is simply not good to do so from a marketing point of view. The platforms are better off offering slightly lower rates and thus making money off investors from the spread between the interest rate offered to the borrower and the rate that they offer to the lenders.
Some P2P lending platforms charge flat fees to borrowers. This is is especially true for bigger loans such as business loans that run into high thousands of euros.
For consumer loans, the lending platforms tend to simply charge a margin in interest percentage (they will charge the borrower an interest rate of 25%, while giving a rate of 15% to the lender and keeping the remaining 10% for themselves).
Conclusion
If you’re interested in trying out peer to peer loan platforms, I suggest you start off with Mintos.
I’ve been able to consistently achieve returns higher than 10% over the past two years, and so have my friends who are also invested in this platform. If you have any questions about Mintos, October, Twino, Grupeer or other platforms I mentioned, or how the model of peer to peer loans works, please leave a comment and I’ll do my best to answer your questions.
Before you make any investment decisions, I also encourage you to have a look at how your country taxes proceeds from peer to peer lending. You can check out my article on how peer to peer lending is taxed to get started on this topic.
Have you invested in p2p lending platforms? What has been your experience with these platforms?
Hi Jean,
Thank you for your interesting article about the best P2P lending platforms in europe! It helped me significantly, but still had some questions where I would like to receive your insights:
– How much (%) of your monthly recurring income (an employee salary) would you invest in P2P lending platform?
– What would be your maximum total amount that you would invest in Mintos and IBAN?
– When and how often would you withdraw your profits/money from these platforms?
– Imagine you have 100K EUR available. How would you diversify it accross different investments? (Does not need to be only P2P platforms, can be shares, real estate, savings accounts, etc…)
– How much would you always keep in your savings account?
– Would you consider IBAN as a savings account?
Thank you in advance for sharing your insights!
You’re welcome Alexander.
Since I’m not your financial advisor (nor am I a financial advisor, period) I cannot suggest what percentage of your salary you should invest nor what total amounts you should invest on any platform.
I would not consider IBAN as a pure savings account, as it comes with risks that you wouldn’t have with a traditional bank’s savings account. On the other hand, the savings account at your bank will give you zero returns these days. So it’s a balance between risk and reward that you have to take.
I like to keep at least 6 months of savings in a highly liquid form, being in actual cash, current accounts or other. If possible, I feel more comfortable to have 1 year of savings, perhaps having 6 months’ worth as cash in a bank account, and the other 6 months invested in a highly liquid product such as Mintos’ Invest & Access account. The idea of having 6 to 12 months’ worth of money always available is that it gives you a nice cushion if you were to lose your job or have some other calamities happen in which you need quick and substantial cash to get out of a tough situation.
I am always seeking to invest more and more of my net worth, so the better question is not when to withdraw but when to rebalance. You will obviously need to withdraw if you have some big expense coming up such as a home purchase, but apart from those expenses I just monitor the market and see if it makes sense to move some of my money from one asset class to another. I do this roughly once a year. An example would be to move some money out of the stock market and into P2P lending.
As to your question about how I would diversify, as I just mentioned I like to be as diversified as possible, but I don’t currently have a fixed strategy I’m following. There are several strategies online that you can read about, but none of them are sure winners, so in the end, my belief is that each investor should come up with the strategy that best suits his current situation and future goals, then updated it every year at least to take account for changes in their lives. Here is a post I wrote about ways you can invest online, to give you some ideas of asset classes I am invested in or have been invested in the past.
Hope that helps.
Hi Jean,
Thank you for these insights and answers on my questions!
I agree with you that it is about the liquidity of your money that you need to consider when determining how much cushion you want to keep aside. I like your idea of 6mth/6mth split.
Great point about the rebalancing, instead of withdrawing, it is indeed about making your money do the work, and keep your net worth grow and grow. Whenever needed for some high expenses you just withdraw then.
Good tip on first determining your investment strategies and the goals you want to achieve with it. And especially to review this strategy yearly! In the beginning I would personally do it even more often, just to be sure if I’m on the right track.
Thanks for sharing your blog – I will read it.
One more question – do you know if it’s possible to chose eco-friendly or sustainable loans on Mintos?
Cheers
Alexander
You’re welcome Alexander!
I hadn’t thought about eco-friendly and sustainable loans and I don’t believe any platform focuses on that at the moment, however it’s quite interesting.
Could you explain to me how you would define such loans? I’d be happy to investigate further once I understand the concept better, and even talk to the platforms to see if they have any plans to that respect.
Hi Jean,
Eco-friendly loans – People receive only loans if they buy products or services that are ecologically responsible. (e.g. purchase of an electrical motorcycle, isolate your house, etc…)
Sustainable loans – Only companies or people receive loans if they do sustainable things for society (e.g. make sure girls can go to school, handicapped people can work on the shop floor, organize a festival for elderly,…)
thanks, Alexander
Got it, I think those kinds of loans will always be the domain of specialised platforms like Kiva.
Thanks for sharing this article. I think that Peer-to-Peer Lending is a great for business funding. This article is very helpful for me. I think that this will surely help me to grow my business.
Agreed, thanks for commenting.
Hey Jean,
thanks for this extensive review! I have been reading your blog for a while (even before I started to invest into p2p….basically as some sort of preparation 😉 ).
How do you generally judge investing into business loans, so p2b? Platforms like Envestio and Crowdestor are pretty big cornerstones of my p2p portfolio by now and give me an average return on investment of around 16%.
Have you been tapping into that investment sector as well? I know that you have been more critical towards e.g. Envestio in the past.
Thanks,
Marian
Hey Marian,
Thanks for your nice comments, appreciate it. I think business loans can be a good component of an investment portfolio, but I am critical of loans to businesses that are just starting out and have no real foundations. It’s like investing in a startup without the potential upside, since your return is limited. When investing in P2B loans I look for well-established companies who are not likely to default or have their new project fail. One area I will be looking into during the coming months is factoring and supply chain finance for well-established businesses. I’ll report on that once I have seen some results from my investments.
Overall I think that everyone is happy about the returns that many platforms are offering, the question is for how long this is sustainable. While I’ve invested a lot of money into P2P platforms, I keep a very close eye on the overall financial markets and the platforms to try to anticipate any negative trends and take my money out before it’s too late. So far so good, we’re still in the growth stage for these platforms, so it’s natural to have a very positive air around the industry, strong incentives for investors and high returns. Let’s see how far it goes.
Yes, good points. I tend to make sure that my p2b investments have a loan duration of max. 1 year and I keep an eye on the respective markets (essentially the Baltic States for p2b platforms like Envestio, Crowdestor, Kuetzal etc).
As you said, it’s a growing business and everyone is in that positive spirit which is great as long as we keep our eyes open.
cheers
Marian
Very helpful article. Thanks for sharing Peer-to-Peer Lending history. This definitely helps me a lot to be more knowledgeable about Peer-to-Peer Lending. I think that I can use this for my business.
Hi Jean, thanks for your post. I have just start reading about p2p lending when I came across to your blog.
You mentioned that “(…)We are living in an age of abnormally low interest rates and low inflation.” which is indeed true.
But one thing that intrigues me is that with such a low interest rates, why companies would pay 10-15%y when they could borrow much cheaper money from a bank/ financial institution? As non-expert in this field, the unique reason I can see for this is that the lenders believe that it is too risky for their portfolio.
Could you please elaborate more on that?
Thanks
Good question Ged. That was one of the first questions I asked myself when I came across P2P lending. The simple fact is that after the big global crisis a few years back banks tightened their lending policies severely, partly to protect themselves and partly because the governments and powers that be put a lot of pressure on them to keep within certain parameters.
We can also see the same happening with opening bank accounts nowadays.
Perhaps you remember that 10 years ago it was much easier to open a bank account anywhere in the world. Nowadays both private clients and corporate clients are put through hell by banks demanding reams of KYC and AML documentation, and sometimes outright refused due to their not fitting into what the banks deem “low-risk” clients and businesses.
These two facts result in a situation where many people and businesses are struggling to obtain funding through the traditional means (banks) and thus are forced to seek alternatives. That’s where loan originators and P2P lending platforms come in.
Essentially, companies and individuals are ready to accept much higher interest rates since they have no other alternative of obtaining finance, since they’ve been excluded by the banks.
While it is true that many of these businesses and individuals can have certain elements of risk, we must keep in mind that risk is a very subjective thing, and just because it is risky for a traditional bank doesn’t mean that that individual or company must not be lent to.
A simple example that you will surely understand is the following. Consider two individuals, Person A with a net worth of €500,000 (ownership of various assets including shares and other financial instruments) and Person B with a net worth of €10,000. Both go to apply for a car loan but only one gets it. Why?
The bank does the standard paperwork and discovers that Person A does not have a monthly income, but rather relies on his considerable savings to live off. He retired young and does not need to work to support his monthly family expenses since he has good investments that have been appreciating over the years. Person B, on the other hand, has an entry-level but stable job that pays him €1,300 a month.
In this situation, most if not all banks would rather issue a loan to Person B since they know he has a monthly income and part of that can be destined to paying back the loan, but Person A offers no such guarantees as he cannot show the bank any monthly payslips or regular income.
If these two people came to me, on the other hand, the decision wouldn’t be as clear cut, in fact I would probably be more likely to lend money to Person A rather than Person B because I have very different criteria than traditional banks. As you can see from this example, Person A is being forced to sing alternative funding for his loan because he does not fit into the “good borrower” definition of traditional banks.
Happy to discuss further if you want to follow up.
Quite clear, Jean. Thanks again.
Looking forward to go through the blog content.
Regards
Interesting read, but does it pay to ‘re finance a commercial real estate loan using P2P platforms and are any active in the Maltese market?
Things have gone well so far for me by none of the platforms are active in the Maltese market nor do I expect any to be doing so in the near future.
I think the Maltese market is in a bubble at the moment and I can’t see how the rises in rent and purchase prices can sustain itself much longer. I wouldn’t invest in the Maltese market myself, at least not on a long term basis, which is usually the horizon in looking at with my investments.
Welltrado is an affiliate site at the moment. They have been in the market for more than 3 years already and i do not understand the purpose of their business yet. We have started in January, launched private beta in May and we already bring value for customers, where they can deposit money with us and invest in 10+ platforms and 10 countries with one account.
Evo Estate earns money from platforms/originators – they share their commissions with us. Our investors basically get same deal as if they have invested in originator platform directly.
Hi Jean
I just discovered your blog and found it very interesting!
Have you ever used the website Fastinvest? If not, what have you heard about it? I have been using it for 9months and seems quite good.
Thanks Steve, I am familiar with FastInvest but it’s not one of my favorite platforms due to a dubious founding story and lack of transparency with their financials and loans.
Hey Jean, Incredible piece of information over here.
you make some good points about Best European P2P Lending Platforms to Invest in 2019 that I never thought about.
Thanks for sharing!
You’re welcome John.
Hi Jean. Awesome catchy post, i agree on most of your points!
You talk about the importance of liquidity, but i generally see direct P2P lending (without loan originators) to be more secure, even though the liquidity might be lower compared to the mass production loan originator service Mintos provides. Can’t it be two-folded? I mean would you definitely only go for the top 20 largest p2p lending providers compared to those listed with a lower total funding volume on a site like say p2pmarketdata.com – or do you differentiate in the three party platforms vs. four party platforms (with loan originator intermediates)?
Thanks Martin. Very interesting question, thank you. I tend to look at many factors and the bigger platforms like Mintos tend to have not only higher liquidity but easier ways to get in touch (support in multiple languages), a better interface, a bigger secondary market, etc.
I’m not saying it’s the best way to do things, but I don’t want to spend a lot of time on P2P loans every month, so working with the big and proven platforms gives me more peace of mind and saves me from spending time to learn new interfaces, getting to know new people at each website etc.
Are you still satisfied with Twino or are you experiencing heavy cash drag?
Twino is still good, but I don’t see it surviving long-term against Mintos. We now have a market saturation with so many platforms, and inevitably some of those will have to fold in the coming years, unless they pivot or diversify in a significant way.
In the case of Twino, as an example, their offering is pretty much identical to Mintos, but they have not managed to keep up with the growth of that platform, hence I see investors shifting to Mintos in the coming months/years. This is also something that I am doing myself and would recommend. That’s not to say that Mintos is guaranteed to stand the test of time, but right now I think it’s safe to say that it is the most successful and stable P2P loan platform in Europe.
I completely agree with twino vs mintos. That is why i have withdrawn all the money from Twino recently
Good to know. Would you recommend other platforms that are as stable as Mintos?
I am cofounder of EvoEstate.com – Real Estate P2P aggregator – our goal is to have the safest investments (only real estate as collateral) and most geographically diversified. Our clients have invested in 8 European countries through the platform.
I see, that’s a novel and interesting concept. Can you explain how it works?
Here is explanation how it works: https://evoestate.com/page/how-it-works/
In short: we are intermediaries. Investors do not pay us any fees. Investor gets value ad: easy diversification and secondary due diligence of projects by us
I see, then you must be making your money off some form of affiliate agreement with the platforms. It’s the first time I see something like this being done apart from Welltrado which I think was setting up something similar. I’m not sure there will be that much demand for an intermediated service like this, and I personally think that it’s one intermediation too far.
However, it’s still early days in this market and it might very well be that investors like this simplified approach to investing. Good luck with the project.
We are not working as Welltrado or affiliate. You can have one wallet with EvoEstate and invest through it to all other platforms. Also when you do your taxes, you get one account statement, which saves you time.
How is it different from welltrado and how do you make your profits?
Hi Jean,
Great site. Last year I started to invest in various P2P companies and used reviews like this to choose my investment platforms. I find them very helpful!
I hadn’t heard much about Lendix before, so I had a look at your review. Something I noticed was that Lendix changed their name from Lendix to October. I read that the change was due to Lendix/October wanting to expand into other financial products, not just lending. They thought October was a better name…
Also, have you had much to do with Grupeer?
Keep up the good work!
All the best,
Matt
Thanks for stopping by Matt, I’m not sure why October would be deemed to be a better name, although Lendix is a bit generic given the number of platforms with the word “Lend” in their name, especially if they wanted to expand to other financial products.
In any case, I really like October, it’s a no-nonsense platform, less flashy and marketing-oriented compared to other platforms, but they deliver the goods. I have had no problems with loans I invested in, and they tend to supply the right amount of information (and in English) about the borrowers.
I only started recently with Grupeer so I’ll have more to say about that one in the next few months.
Hi Jean,
Thank you for the nice informative article, loved it!
I’m excited to start on Mintos soon.
Also, you mentioned that you also invest in stocks. Do you mean ETFs? I wanted to try out robo-advisors such as Betterment, but they only allow US residents. In your expert view, could you please recommend a good robo advisor with a low starting fund I could look into? What company or platform do you use to invest in stocks, loans and real estate?
I look forward to hearing from you. Thanks a lot 🙂
Excellent, Mintos is my favorite platform for P2P.
For roboadvisors I can recommend Indexa Capital and Finizens. I believe Indexa Capital is open to European investors with a few exceptions, while Finizens is limited to Spanish residents.
I have written about all the real estate platforms I use on this site, just use the search option and they’ll show up. It depends on which country you want to invest in, so make sure you include the country in your search query. I have invested in Spain, Italy, Portugal, Germany, UK real estate so far.
With regard to stocks I like the dividend growth investing approach, and the choice of platform really depends on what kind of trading and investing you plan on doing, the amounts you want to invest and where you’re a resident. Some good brokers to look into are Interactive Brokers, Saxo Bank and DeGiro. I’ve written about the best stock brokers in Spain as well as the best stock brokers in Europe based on my experience and research.
You should not forget all the risks Mintos have. Especially now, when they got denied by FCA.
All loan platforms have inherent risk and I would agree that they should be a minimal part of one’s portfolio. On your blog you make some important accusations with regards to Mintos, but you don’t reply a comment stating Mintos’ own reply. Would be nice to see your reply to their reaction.
1. The accusation part is a copy from Blogspot – I have put a copy so that it does not disappear.
2. The reply is not by Mintos, but by some other 3d party, who got the reply from Mintos.
3. I have not found any article on Mintos Blog related to Shareholder Relations between Mintos, Mogo and others.
Ok but since Mintos addressed the concerns you highlighted, what’s your reply to what they said?
so there are 2 issues:
1. Buy-Back guarantee. Everything is fine here and they probably have changed terms and conditions.
2. Relationship between loan originators (Mogo, Hipocredit and others) – i could NOT find any article in their blog as they claim:
“We also have published information on our platform when there are overlapping between Mintos and loan originators shareholders.”
Thanks for expanding on that.
Shame he wouldn’t expand on how they make money ….
Hi John, if you mean how the platforms make money, that is a good point indeed and would be a good addition to the post. I’ll add in a section about it, thanks for your feedback.
Thanks for sharing a informative post.It is really informative and helpful.valuable information provided.An installment loan is a loan that is repaid over time with a set number of scheduled payments;[1] normally at least two payments are made towards the loan. The term of loan may be as little as a few months and as long as 30 years.
Hi jean, I appreciate the site, recently moved to Eire from UK, I wanted mention I’ve bn using funding circle zopa rayesetter in UK for last 2 years so I’m used of the concept, I moved here year ago and inbvestef in linked finance , but I have bn looking into European p to p sites, thanks to yours asmd others I started invest mintos October 2018 and when exchange Rateimprove all use twino and lendix
I do have a question for you , I wish to invest into equities like a MAP or something like that a fund that would be fairly safe I guess, as i take my risks with p2p
Do you recommend any funds I could look at? They are so many , its tricky to know which way to turn ,
The sum I wish to usebis approx 50\60k euro
This would diversify my money nicely between p2p UK Eire and Europe ,, not intrested in owning property again , way too much hassle , p2p has given me my time bk so…..
Appreciate your thoughts and if u wanted to know anything of my experiences using p2p in UK
Kind regards
Mal
Hi Malcolm, it would be cool to know about your p2p experience in the UK for sure.
With regard to equities I’m not an expert in that area but Vanguard index funds are always highly rated. I would recommend De Giro as a broker.
There was a very good informative post that does an excellent job of introducing the concept of top European peer to peer landing sites in 2018. Thank You.
You’re welcome.
Hi Jean, thanks for the post! Can USA investors invest in Mintos and Twino?
I believe so Tom, here’s what it says on the Mintos FAQ:
Both individuals and entities can invest through Mintos. Individual investors must be at least 18 years old, have a bank account in the European Union or third countries currently considered to have AML/CFT systems equivalent to the EU, and have their identity successfully verified by Mintos.
Family trusts, partnerships, limited liability companies and other organizations must have a bank account and be registered in the EU or third countries currently considered to have AML/CFT systems equivalent to the EU.
what is the incentive for you advertise a good P2P platform that you invest through? I also invest through these platforms but will not tell any of my friends, let alone write a blog about it. You know, success attracts more money and before you know it returns will come down. Also i fear that the really successful platforms may be bought up by big banks or hedge funds and then they will put their own funding in and shut it down for retail investors. So, shhhht don’t write about this anymore. It is our secret ok?
I take that as a tongue-in-cheek comment but it’s worth mentioning why I share this stuff. Blogging about my investments helps me learn and also helps many of my friends learn from my experiences. I love sharing and teaching and blogging about many topics comes natural to me. The argument about attracting jealous eyes or having others flood the market has existed since the beginning of time. Yes there is this risk, but the benefits I obtain from blogging far outweigh the downsides. For every set of jealous eyes, there are 3 or 4 other people who read my articles and leave valuable feedback that makes me a more informed person and better investor.
Great Article…I mainly use Mintos; will see others though as well. May I ask you Jean if you ever had a loan yourself with one of the sites mentioned or others? If yes how was it? Maybe an article about the experience? Mintos don’t give loans as I checked….You can just invest….
Hi Joseph,
I’ve only been active on these platforms as an investor.
ok thanks. I will try to get a loan from them…if you want i will report back to you how it was
Sure, that would be interesting thanks.
Will do…Cheers
Very interesting article! I read about Mintos and Twino from other blog posts and articles, and it looks like they are quite reliable with good returns too. Are there any other platforms that you would recommend that are known to accept investors from Malta? Also, how does the tax system work after starting to get the returns?
Thanks Bjorn, those are the only two I would recommend at the moment. You would need to declare the returns in Malta, they give you the gross sum and then you deduct tax from it and declare it, leaving you with the net amount. Best to check with an accountant exactly how it is noted on the Maltese tax return.