9 best Peer to Peer lending tools in Europe. Opinion and 2š„picks 2018
Reading time: 4 min
Best P2P lending platforms open to šŖšŗ international investors?
ā¶ļø Here is my global peer-to-peer lending insider review
My best p2p tools:
P2P vs. AuxMoney Germany 6%
P2P vs. Bondora Estonia >25%
P2P vs. Lendix France/Italy 9%
P2P vs. Smartika Italy 6,5%
P2P vs. Mintos Latvia 18%
P2P vs. Fixura Finland
UK Social Lending instruments:
P2P vs. Funding Circle 7,5%
P2P vs. Ratesetter 5,9%
P2P vs. Zopa 4,5%
4 things to know before starting with the best peer 2 peer:
Is P2P for you?
Risky or regulated?
Ethical P2P lending
Final considerations and 2 winners
How do I try to reduce risk and maximize performance while investing in P2P loans. It's free to read!
P2P LENDING IS REVOLUTIONISING THE WAY PRIVATE CITIZENS, BUSINESSES AND REAL ESTATE DEVELOPERS SEEK FINANCING ON THE MARKET.
DIRECT LOANS BETWEEN PRIVATE CITIZENS ARE ENJOYING GREAT SUCCESS. THE FIRST SERVICE OF THIS KIND WAS OFFERED BY ZOPA ALREADY IN 2005 IN THE UK, AND IT'S STILL IN OPERATION.
PEER TO PEER LENDING CONCEPT IS SOMEHOW EQUIVALENT TO AIRBNB... BUT IT CONNECTS BORROWERS AND LENDERS.
HOW TO CHOOSE THE BEST SOCIAL LENDING WEBSITE?
āSOCIAL LENDINGā FOR ME IS A WAY TO CREATE STREAMS OF PASSIVE INCOME WITH A DECENT RISK/RETURN PERFORMANCE IN AN "LOW-INTEREST ERA".
SOME PEOPLE WOULD LIKE TO LIVE OFF A PRIVATE INCOME, OTHER WANT TO DIVERSIFY THEIR WALLET, BUT EVERYONE IS LOOKING FOR A RANKING OF THE BEST P2P LENDING.
P2P TOOLS AREN'T ALWAYS COMPARABLE, SO LETāS ANALYSE THEM AND LETāS FIND OUT WHAT'S MY "P2P INVESTOR OPINION".
The success of peer-to-peer technology started with music file sharing. Napster, eMule (the slowest one) and then Torrent, then with movies on p2p. Now with p2p sports streaming and p2p payments. The attention is now all on p2p lending, the one with the loans, and it isnāt difficult to understand why.
The operation is simple, loans approved by some credit/finance companies are partially or totally offered and fractionated online. Those who wish to invest just analyse the risks, characteristics and returns using the information provided on the dedicated websites. Anonymously, one proceeds to a single purchase of loans, automatically or in bulk with the criteria that one have set up. The ease and the immediacy of the operation will blow your mind; the explanation for it is that many of these platforms are the result of very recent financial technologies and they are structured in a way that reduces the usersā distrust.
The topic of p2p is still fresh and not discussed enough, everyone wonders if Bondora or Mintos is better, or puts Twino Vs Lendix! Are there good alternatives to FundingCircle or Ratesetter?
Hereās my point of view on p2p lending for those who are investing in Euro (and not only). This is my experience. I was skeptical like you. YES, I was. Now I am careful in loan picking and rather happy of it, so far.
Social Lending in Europe
Uk has the biggest market for P2P but unfortunately, their tools are most suitable for UK investors.
Other big and reliable p2p platforms are in the Baltic countries, France, Switzerland, Italy and Germany.
Their stories are more recent but they are collecting millions of euros in record time and they are solving the problem of those who, often unfairly, cannot get a loan in the traditional way.
For those who can speak German, there are AuxMoney, Smava and Zencap.
AuxMoney
āļø
The Auxmoney video spot. European p2p lending rating. Auxmoney is in German language only.
AuxMoney is the giant of loans in Germany and it has been operating since 2007. As it is typical of fintech companies, the founders are less than 50 years old. Unfortunately, it is essential to know German to use it because it isnāt translated into other languages.
Info about Auxmoney:
Minimum investment: 25ā¬
Returns: from 3% to 6%
Languages: German
Partner program: YES
āļø Cashback for new sign-ups: x
Smava is a similar product to AuxMoney, again, it is only offered in German, and it deals with loans between 1,000 and 120,000ā¬.
Bondora is the most famous (and it is available in many languages, virtually >20% returns)
āāāā
This chart shows that most Bondora investors get net returns above 10%. 13% of the investors on Bondora are earning above 20%.
Famous, established and controversial too, even if the vast majority of those who have invested cautiously doesnāt complain about it at all ā on the contrary, they enjoy interests even higher than the current ones (since some years ago it was better). In the past (and a little less now), Bondora has also processed loans with a medium-to-very high risk, with huge annual returns connected to them. This has attracted some investors who however have then seen some of these loans end up in the recuperation process, which isnāt always immediate or resolving.
Loans offered range between an AA (safest) to HR (High Risk) rating. Loans can come from Finland, Estonia and Spain. Currency used is Euro only and purchases are mostly made through automatic wallets. Basically, weāre giving the system instructions on what to buy and the process is automatic, we wonāt have to select the loans one by one, apart from on the secondary market and only if we decide to do it.
Still today, by making random tests on Bondora I managed to simulate returns beyond 40% with Portfolio PRO. Such high-returning loans are risky. It is worth it to sign up for free (even using any Google/Facebook account), to evaluate in person the tool. Also learn more about it by reading āfrom zero to Bondoraā and decide for yourself. The learning curve to be able to use it isnāt too steep, but rather doable for everyone; it is available in many languages and there are already thousands of users.
This is a Bondora statement on their website.
Info about Bondora:
Minimum investment: 5ā¬
Returns: from 5% to 40% (theoretically)
Languages: 14
Secondary market: YES
Guarantee net: NO
User experience: easy to use, but the look is too cartoonish. Returns are potentially very high.
ā Cashback for new sign-ups: YES
My tip: stick to the safest AA-A-B-C (D) loans, returns are still very good
Bonus for new users: 5ā¬ (not much, but you can get it also by signing up from Google/Facebook accounts)
Lendix / October
āāā
It focuses on loans for businesses purposes
6 of the many project to finance on Lendix
It is thus very fascinating to scroll through the projects published on the website, select those with more potential and act as if you were a Venture Capitalist! Unlike the latter, you will however have the privilege to expose you for a minimum of just ā¬20, and so you can lend little amounts to many projects.
The investment is blocked and the returns, even if much higher than the bank average, donāt go over 10%. If you like the idea, giving money to businesses is surely the same as giving a push to the real economy. The languages are French, Spanish, English and Italian.
Info about Lendix:
Minimum investment: 20ā¬
Returns: roughly from 5% to 9%
Secondary market: NO
Guarantee net: Yes
User experience: Good, returns within the average.
Languages: French/Italian/English/Spanish
ā Cashback for new sign-ups: YES
My tip: take some time to understand how it works before investing (learn more ā¬ļø)
Bonus for new users: ā¬20 (min. investing 200ā¬)
Before continuing, I invite you to repay the effort and the research we have put in writing this article: It takes ages to test, study and to sum up the outcome, you just have to share this post to say thank you! It costs you nothing, and it makes us proud!
Smartika is Italian and owned by Banca Sella
āā
Samrtika is only in Italian
It has existed for many years (it was actually amongst the first ones in Europe), it is a legal and safe social lending instrument. The returns for those who invest are slightly lower than its competitors and the website is only in Italian. What doesnāt drive me crazy about Smartika is the 1% fee on the āborrowedā and the participation of the investors in the expenses for loans in debt collection.
Information about Smartika:
Minimum investment: ā¬20
Returns: about 6,5%
Secondary market: YES (conditions apply)
Guarantee net: NO
User experience: nice, returns are average/low
Languages: Italian
āļø Cashback for new sign-ups: x
My tip: ask them details on "Smartika Lender Protection"
Mintos is maybe the one that needs the least presentations
āļøāļøāļøāļø
Mintos stats say it has paid 13 million ā¬ to 53 thousand investors worldwide (so far). I am one of those happy investors.
Mintos isnāt the best one in terms of returns (though they are still high) but it ranks first for many other parameters I value.
The diversification, both by type and by geographic area, guaranteed by Mintos is rather unique. This presumably makes it safer. It doesnāt simply connect the lenders and borrowers, but it connects us with some "originators" of loans, which are nothing else but local credit companies. Most of these loans originators promise to re-buy their loans ( available on Mintos) that are later than 60 days. They actually do it. This protection is called Mintos BuyBack.
Mintosā finances are somehow separated from those of the originators, so virtually, if one of its originators goes "belly up", Mintos would be not be very directly hit.
Mintos has more than 45,000 active investors from 64 countries. Unlike other solutions, it offers loans in 7 currencies. In many cases a ācollateralā asset is available. All the originators need to keep in their wallet from 5% to 15% of each loan, in order to share the risk with investors. There arenāt fees to pay so far.
Info about Mintos:
Read Mintosā Terms of Use
Minimum investment: ā¬10
Returns: from 6% to 18%
Secondary market: YES
Guarantee net: YES
Online experience: Excellent and intuitive. Statistics are clear and easy to read. Very high returns.
Languages: 7
ā Cashback for new sign-ups: YES
My Tip: Buy only loans in your currency / Status: current / Amortization method: full (ask me why)
Bonus for new users: 1% (on the deposits for the first 30/90 days, basically I got ā¬100 as a sign up bonus for every 10,000 I deposited)
Fixura is a Finnish product for high p2p returns (beware)
āļø
This is how I set up my Fixura portfolio. Easy and effective but not cost free P2P.
This one is pretty old too, even if it isnāt among the largest, it was founded in 2010. Fixura mediates mostly consumer loans in Finland and it affirms to select carefully the persons it lends money to.
Fixura makes you pay 2% in commissions, even on what is deposited. This way, if you transfer money and then you change your mind, youāll still have to pay 2%. Moreover, you have to pay fees also when purchasing loans and when cashing in.
It is all very automatic, you can choose the rating, the āloans lengthā and little else, then the system will do the rest autonomously. The rating are done with stars from 1 to 5 and the returns go for 8% to 26%. The investment is blocked until its expiry, so make sure to deactivate auto invest once all the capital has been used.
Info about Fixura:
Minimum investment: ā¬25
Returns: from 8% to 26%
Secondary market: NO
Guarantee net: NO
User experience: average
Languages: 3
āļø Bonus for new sign-ups: NO
Commissions: 2% (very high)
My Tip: Set the āmax amount per loanā to the lowest
UK BASED P2Ps (mostly for Uk citizens only)
The United Kingdom is undoubtedly the biggest and most structured market of p2p lending. In the UK, in some cases, it is possible also to request tax breaks for this type of investment. Itās called IFISA (Innovative Finance Individual Savings Accounts) and it allows to investing up to Ā£20,000 per year tax-free (which can be cumulated).
Funding Circle is the most famous British p2p
Now also available in the US. The first time I heard about p2p was precisely in relation to Funding Circle, and since then I was introduced to a (beautiful) world. This platform only deals with business loans, that is to say, it gives credit to businesses and it affirms to have 72,453 investors who have lent 2.7 billion pounds, earning 135 million in interests. These are impressive numbers. Everyone can invest, you just need to be over 18 years old and to be living in the UK. It takes part in the government programme āInnovative Finance ISAā, so the returns are tax-free up to Ā£20,000 per year. It is surely great to be Britishā¦
Info about Funding Circle:
Minimum investment: Ā£20
Returns: from 4.8% to 7.5%
Secondary market: YES
Guarantee net: NO
Online experience: Modern website and top user experience. High returns
Languages: 3
Uk only
Ratesetter (57,000 investors, none of which lost a penny ā¦)
Itās another p2p UK giant with more than 2 million of lent money, it affirms that no one during these years has lost even one pound. In fact, one of the most interesting characteristics of RateSetter is the āprovision foundā, a guarantee that covers the losses caused by possible unpaid loans. The average investor on RateSetter has a medium stock of Ā£20,000, the returns seem low, but safety has evidently a price.
The loans are mostly aimed at individuals, but there are real estate agencies and businesses, too, while the length of the loans goes from 1 month to 5 years. RateSetter isnāt compatible with ISA yet, but it will be soon; moreover, it has a programme called SIPP that functions as an active pension fund. Ultimately, RateSetter, in order to protect its investors from loss, has even merged 3 credit businesses that were struggling.
Info about RateSetter:
Minimum investment: Ā£1
Returns: from 4.4% to 5.9%
Secondary market: YES, in 99.6% of them
Guarantee net: YES
Online experience: pleasing website. Medium-low returns.
Languages: English
UK only
āļø Bonus: Ā£100 (conditions apply, only UK)
Zopa
Once upon a time when you looked for a loan youād go to the bank. Zopa has changed all of this by introducing social lending and by using the internet as an instrument to connect those who looked for a loan with lenders. Zopa is so requested that it has currently slowed down the flow of potential investors in order to balance the supply and demand of the loans.
From 2017, Zopa has unfortunately removed the guarantee on non-performing loans. The minimum investment is Ā£10, and the fractionation is guaranteed by the investment system itself. You can preventively get free of the loans by selling them with a 1% commission. The transparency is total and everyone can ask for the list of loans, in order to consult it or to evaluate the chart with the default rates listed by year.
Info about Zopa:
Minimum investment: Ā£10
Returns: from 3.7% to 4.5%
Secondary market: YES (1% commission)
Guarantee net: NO (since 2017)
Online experience: excellent website, top transparency and user experience
Languages: English
UK only
āļø Bonus new sign-ups: Ā£50 (conditions apply, only available in the UK)
ā SOCIAL LENDING IS NOT FOR EVERYONE
This is true for two reasons.
One is skepticism. Most people just donāt trust new financial tools because theyāve never heard of it. Trust comes from knowledge, and knowledge takes time.
Another reason is greed. When people are asked to choose between 8% and 35% yield many get wrong and go for the second. It would be ok, but very often the loans with the worst performances in terms of punctuality are the highest paying. I find it safer to balance risk/reward in P2P lending.
There is an increasing demand for the āsafestā class of loans from the smarter investors. It is important to make the system select for us the best and safest loans for us when possible.
It is recommended to spend some time to evaluate the risk/return profile of each tool, not everyone has the time or patience to do that. After all, the returns are definitely higher compared to whatās on offer on the market of āguaranteed capitalā. This is an age of low interest rates and low inflation.
This blog is not a recommendation to invest in any of these tools. It is just one more point of view from someone who is invested from some time already. It may inspire those who are just starting out, and those who want to take it up a notch but have no time for studying the mechanisms.
Keep in mind that the loans arenāt always guaranteed and, even if they are, some limits and conditions apply. It can be also appropriate to choose loans with reasonable ratings.
The investment process isnāt always as immediate as youād expect. Sometimes you may have to wait some hours/days before being able to see the assigned capital. Setting up very restrictive parameters to the loans in automatic wallets is generally the cause of the slowness of the process. In my experience Fixura was the slowest to buy my loans while Mintos is the fastest.
The default risk of a platform or of a loans originator is never to be excluded. There havenāt been sensational cases in Europe, but for example, there has been one in China. Generally, the finance of the p2p websites are well separated from the usersā oneās so, even in case of a default, happy ending solutions are still possible.
P2p lending might be a good tool to distribute the risk of a part of a global portfolio while enjoying automated returns. The European bail-in system, that offers a guarantee to bank deposits under 100k Euro, isnāt obviously extended to any investment included p2p lending loans. By the way, the European bail-in coverage is also in discussion and it could be even removed one day. Donāt invest all your capital in social lending and distribute it on more than one account or at least in two different countries if you can.
Social lending is regimented and authorized, it isnāt the Wild West ā rules are clear and they are dictated by organizations in each Country. All the listed websites are able to provide detailed information about the service they offer and they are usually extremely transparent, precisely to get over the diffidence of future users.
It is good to keep in mind that the platforms that offer many guarantees and advantageous taxation programmes will normally give lower returns. Instead, the most aggressive solutions, together with crazy returns, can also give us the annoyance of having to wait to recover credits for months or years (a number of high-risk loans will be inevitably non-performing). Here you can make the difference by selecting with care, caution and common sense. Letās remember that high returns are linked with adequate risks.
Doubts of the ethicality of some originators.
Some originators in some countries charge borrowers with very high rates. This happens for a series of reasons that arenāt always caused by some not-to-ethical practices. On one hand, some of these individuals/businesses wouldnāt find easily credit elsewhere. On the other hand, a short loan of a small amount of money is obviously subject to relevant fixed costs (in relation to the amount) that make the total cost of the loan go way up. It is possible to get informed before investing to ensure that the rates applied to borrowers are sustainable.
No-profit p2p Lending
āClear your conscienceā and invest no-profit with Kiva and the other tools. these are fantastic tools. I am a proud gift investor on Kiva. I also recommend Kiva to borrowers to raise funds when I travel in developing countries.
For those who remain in doubt and would like to do the right thing, maybe even to balance the ethicality of their investments, there (luckily) is WWW.KIVA.ORG
On Kiva, we can finally lend without interests to people with small projects in developing countries. Iāve done it and the feeling of helping people is amazing, the website is awesome and it is even possible to gift a 25$ coupon to whoever we want to.
You donāt make a profit on Kiva, but you have the certainty to be doing some good, and thatās wonderful. I think itās an extraordinary gift idea. The website is only in English.
Similarly to Kiva.org, we have Zidisha.org (more efficient than Kiva) and BabyLoan.org (microcredit 2.0).
The majority of the instruments mentioned has been tested in depth. Returns higher than 25% are often only hypothetical.
ā To sum up:
- In my opinion Bondora and Mintos are the most accessible to anyone and are both easy to start with. (Open to international non-resident investors)
- Bondora even allowed me to register through my google account and make a deposit by credit card.
- Fixura is ok but it charges very heavy fees.
- Lendix/October has not very high rates for now. On Lendix is more complex to evaluate the risks.
Sometimes there are cash-back campaigns available for new subscribers
This blog has purely informational and educational purposes
Nice article, wasn't it? If youāve found it inspiring, do me a favor, share it on Facebook
NOTE: The indications contained in this analysis are to be considered mere information tools and do not intend to constitute in any way financial advice, solicitation to the public savings, suggest or promote any form of investment.
Nice article, wasn't it? Let's keep in touch!