During the last years, peer-to-peer lending sites have sprung up from the ground and it has become hard to differentiate the good from the bad, the sites that earn you real interest from sites that just don’t work or will even make you lose your funds.
As with all types of loans, if too many borrowers default on their loans, lenders will lose their funds.
One of the more recent platforms claims to have found a solution for exactly this problem – all while still boasting double-digit returns.
I recently had the pleasure of interviewing Frank Steffen, co-founder and managing director of the service on my podcast and we went through everything from the core idea of Lendary, its history, the team behind the product, to the lending market in general. With this review, I will complement what I’ve learned during this discussion and what I’ve seen on the Lendary platform.
What is Lendary.net?
Lendary describes itself as an alternative peer-to-peer lending service that generates returns by automating and optimizing a process that is quite different from the traditional activity of lending money to individuals or small businesses: ‘Margin funding’.
To understand margin funding, one needs to understand margin trading, i.e. the act of “trading on margin” or leveraged trading. ‘Margin’ stands for the margin of safety that every trader has to bring in equity before receiving a short-term loan that is then invested in a trading position. This in itself is an age-old practice and is known from almost all traditional markets (stocks, bonds, FX etc.).
Usually, a broker or a bank will act as a middleman and provide the necessary capital and will charge an interest rate in return. Some newer crypto exchanges, however, have started to open up those ‘funding’ markets to people like you and me – that’s how peer-to-peer financing of margin accounts started to emerge.