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How not to use Bondora and live happy
What do I want from Bondora
I am creating my financial freedom so I want to build passive income streams on which to count in the future.
Science fiction? No. Keep reading.
After some extended research, I decided bondora was one of the tools to achieve it.
Its “portfolio pro”, if used with awareness, allows to manage risk/return while delivering high return
Here is a quick recap on how I dealt with portfolio pro (and with social lending in general)!
An advantage when using bondora is that I don’t really have to study finance and economics in order to invest. There are statistics and loans data available, let’s read it.
With the automatic investment tool, I was able to transfer what I wanted and start off in a short time.
My Bondora story step by step is:
- I used the 5€ bonus they gave me upon signing up
- With this money I bought 5 loans (1€ each)
- I realized it was working as expected
- I could have control
- Now I wanted more loans
- I transferred money
- Learned the setup and activated it
- I reinvest every cent I earn in new loans
- End of the story
Bondora minimum investment is €10 (I can also deposit by credit card, I’ve tried it myself, it worked fine), and within two clicks I was ready and active.
“Active” just means I have deposited and set the system, I didn’t and I don’t have to do much else. (mmm, this is partially true. I also manually buy loans on the secondary market sometimes. I enjoy doing it, even if it is not necessary).
I’ve been on Bondora for many years now
Actually I’ve just had to transfer the money and set up the auto-investment tool, that’s all.
When I’ll need to stop this (months or years, not days), I’ll transfer everything, or a part of my money, back to my bank account.
My problem with P2P lending
The real challenge for me was actually getting started with bondora and P2P lending.
Many people are losing this chance because they are still a little wary of this new financial tools. Honestly I was scared to death to lose money.There were some bad opinions about Bondora and P2P Lending in the web.I wasn't comfortable ignoring it and I didn't want to make stupid mistakes.So I put in contact with those who were complaining and I found out what went wrong for them. Click To Tweet
Most bad reviews on bondora are written by people who collected many (mainly spanish) high risk loans in the past. Lots of this high risk loans are slow or have defaulted.
Greed was not good…
Here, I’m going to show how I set up my (conservative) Portfolio Pro once and for all
Is Bondora something new?
Tens of thousands of European citizens use Bondora to make investments with high returns – if you thought you’d discovered it first, you’re probably disappointed now. Bondora is nothing new, this social lending platform is large and well-established by now, it is based in Estonia and it allows to invest in non-bank loans in Euros.
Let’s activate My “Portfolio Pro”!
The most horrifying aspect of Bondora is the cartoon-style photo in the home page, only the tool Robo.cash (which we don’t like) can do worse than that in terms of a trashy style.
Robocash home page might be too cartoonish for a financial tool
Apart from this, Bondora website is easy to use, “almost” fast and the returns are high.
Bondora is a long-term investment, please bear in mind that it takes months or years because this isn’t a lottery, a scam, or one of those “become rich now” promises that the internet is full of.
Everything is legal here, with a risk proportional to the interests, so it will take me months before obtaining results that are desirable enough – few days certainly aren’t enough.
How to leave Bondora
Before even starting to invest I felt the need to know if it was possible to exit Bondora and how
To leave Bondora and transfer my money back to my bank account, this is logically possible by selling my assets to other investors.
Considering that Bondora is a tool appropriate for long-term investments, I have to bear in mind that it might take a few months or even longer to sell everything and leave.
(2019 Update: Bondora Go&Grow 6.75% program now allows to cash in immediately. Conditions apply)
In general, the loans that have no delays are easyer to sell, one more reason read how I keep the numbers of my late loans to minimum.
So to exit the platform it will be sufficient to sell everything on the secondary market, as explained here in “the most profitable way to exit Bondora“. The market is liquid enough.
My remaining balance that has not been invested is always available to be transferred back to my account.
I like Bondora, ok this is true, but there is nothing magic here. Everybody needs a starting capital, even small to create an important stream of income. Time will do the rest.
Compound interest is sexy
I use p2p lending and therefore Bondora, too, to multiply my savings and to enjoy the magic of the “compound interest”.
Image from ” the calculator site “
In this way, an invested and reinvested Euro, together with the interests that it has generated, leads to an exponential result.
Do I want to turn 10,000€ into 40,000€, and thus to quadruplicate a capital?They did not teach this to me at school, but I just need to keep them invested for 10 years with a 15% yearly interest while I reinvest all the interests received year by year.… Click To Tweet
Of course I can do even better and duplicate a capital in way less than 5 years, if I find a rate of 20% yearly or higher, but here the problems start.
In this historical period, nobody will offer me that much in Europe under normal conditions, and if they do, I just don’t trust them.
By cautiously investing through traditional means, I’ll probably have the opposite problem and maybe an entire life won’t be enough to double up my money, after deducting the fees that they normally apply. A good independent consultant might help me, but I decided to learn by myself.
Here is how do I use the simpler Portfolio manager Bondora.
Exaggerated expectations? No. Risk/reward.
So let’s go back with my feet on the ground and let’s see if Bondora can give me more than 10%, which I need to justify the effort to understand how to use it!
Apart from the automatic portfolio, Bondora also offers me another more powerful tool, called “Portfolio Pro”.
This allows me to choose with more precise parameters the loans I wish to absorb. I like it because it increases my control on the product, and thus it lets me manage the risk better while always keeping an eye on the returns.
The returns must always justify the potential risks connected to them. Of course, not even with Bondora it’s easy to calculate exactly the risks, so I’ll be even more cautious than in a normal situation. With social lending, it’s inevitable that some loans won’t be repaid on time and some will end up in the automatic system of debt collection.
No hard feelings. Taking into account the high returns, the balance will be more likely very positive. Moreover, the system splits my investment into several loans, reducing even more the impact of possible debtors in default.
If however I let myself to be tempted beyond a certain limit, then I’ll be looking for trouble.
I decided not to be greedy and not to fall where many other people fall.
Investing takes time, if i want money immediately I need to go to work, investing is not “immediate”.
Bondora ensures to give credit only to those who will be able to pay instalments and it assigns a rating from AA to HR (going through A-B-C-D-E-F) to debt.
Pro tip: Their rating system works very well in Estonia, but is less reliable in Finland.
AA is the maximum of credit reliability, while HR means high risk.
Temptation here is to select only high-risk loans and to try and obtain the promised 35% yearly return in interests.
In for a penny, in for a pound…
Sadly, that’s not how it works at all.
Do NOT set up Bondora this way!
HR means high risk, and high risk means possible default ad late payments. See how I reduced to avoid risk (and revenue).
Bondora assigns that rating and it applies that rate precisely because the likelihood that the subject won’t pay is high (HR).
So let’s forget about all the loans that go beyond a D rating; normally I select only AA, A, B, C (D is borderline), because by adding E and F, the estimated returns don’t go up enough to justify the potential risk.
I don’t think the HR loans are an investment, I avoid it.
As an added protective measure, I also reduce the length of the loans, as time is, too, a variable that increase the risks. So I only select the loans that will be repaid within 2/4 years.
Increasing the length of the loans to purchase doesn’t always proportionally increase the returns.
Let’s also take into account that the estimates that Bondora does during this process are, precisely, estimates, and often not very reliable ones; in this case, however, they’re unreliable in a good way, as they are pessimistic.
For example, in my case, for at least 50% of the portfolios I created, the “real” returns (after deducing the momentary losses) ended up higher than those estimated.
I keep in mind that that I create all the portfolios I want, what I shouldn’t do is to have them too different from each other, as it is discouraged to do that.
I do that anyway.
What happens instead by restricting too much the length of the loans during the selection, is that the speed with which I’ll obtain the loans in our portfolio decreases, too.
Yes, setting up a portfolio doesn’t means I am immediately invested. It takes days, sometimes weeks to see a full portfolio.
The more restrictive my parameters are the slower is the building up.
This happens because the demand for good quality loans is extremely high and recently Bondora has changed the assignation policy in order to make everyone happy and not just the big investors.
So if I’m in a rush to invest immediately, I should lengthen the loan duration to >36 months and reduce diversification or go beyond the C/D ratings.
My Bondora basic settings (10-15%)
As a precaution, I bring the max investment per borrower up to around 10/20€, and never beyond that.
I mostly avoid Spanish loans, they can be problematic.
As I said I have noticed that by raising this limits will accelerate the process of portfolio building.
Fractioning my money on more loans is an added guarantee in these cases and raising too much this value increases our exposure in certain positions.
This is a super example on how I set a Bondora portfolio to lower risks and boost long term performance. Nowadays 48 and even 60 months durations are not a big problem anymore (can be sold).
At the bottom, I find a “+” button that makes me add selection criteria to my portfolio.
The first one is “Bid Size”
It is easy to understand that it makes you fraction the investment for each single loan in smaller pieces. You don’t need to select it under normal circumstances. Click on the red X to deactivate it.
The second one is “Portfolio Limit”
If I’m building more portfolios, I can put a limit to how much will be invested in each of them. In this case, too, I shouldn’t select anything unless I have specific requirements.
The third one is “Share Cash Balance”
This function allows me to leave a certain portion of money in the portfolio. If I select this function, I’m going to limit what is investible and re-investible in the future.
The last one is “Interests”
The cursor can be moved between 1% and 275%.
I prefer not to move. I prefer to adjust the ratings. It will useless to try and purchase loans with A/B or C rating and demand for a minimum of 30% in interests, so I don’t need that cursor.
Finally, by clicking on “Start investing” I instruct Bondora to purchase loans for me, precisely according to the conditions I have just set up!
I am now active!
I am investing in high-performance loans!
What happens after starting?
The money liquidated from the interests and the principal will be re-invested each time and will produce that exponential profit curve that is typical of compound interest.
Before continuing, I invite you to repay the effort and the research I have put in writing this article: just share this post! It costs you nothing, and it feels great for me! Thank you!
As you might have noticed, it is a rather easy set up, it however has the advantage of increasing considerably the control of what is bought.
Is Bondora safe or risky?
It isn’t guaranteed that all the loans with AA/A/B and C rating are infallible, but they surely have been considered safer than others and they make me start with the right foot. I have the statistics from 2009, and I take advantage of this.
The rating system has improved a lot lately, especially on Estonian loans.
Amongst others, my portfolio has Estonian loans with B ratings with 18% returns, and others with A rating that pay 12%. My statistics are (so far) really, really good.
The global reviews on Bondora are good on trustpilot.com, so far. Bad reviews are mostly from adventurous users or people in rush to get out from a long term investment like this.
These data confirm that I made the right choices (for now), by not exposing myself to lower ratings and thus to higher returns, as I need as little as 10/15% on average, in order to balance risks and returns.
My percentage of defaults is irrelevant.
Those (beginner users) who in the pasts have gone beyond that, tell that they had to wait a really long time before bringing home results that were proportional to the hoped-for returns.
Some of those investors are still waiting to recover the credit on some old loans, and generally, in the mean time, they blame Bondora.
On the other hand everything would have been easier if Bondora hadn’t offered such HR loans some time ago.
Anyway, I won’t do the same for me, so I resist temptation, and I follow these instructions.
In alternative the “Bondora portfolio pro” advanced users with big volumes may rely on the interesting Jarmo Pertman app.
Bondora video setup
“C” rated loans can be rather risky even if the interests are very high. I prefer to build many portfolios Pro with different characteristics.
I’m writing this recap because it’s the one that I would have liked to find on the internet, when I came in contact with Bondora and social lending.
✋🏻Any questions? What is your experience so far?
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