How to sell my defaulted Bondora loans?
Who can benefit from a Bondora secondary market restructuring procedure?
What to do with late P2P loans?
I’ve never hidden my enthusiasm about Bondora P2P. I know how to use it and how to lower my default rate to the minimum. I make steady profit with Bondora together with thousands investors worldwide.
Some people don’t share this opinion with me. Unfortunately, some of them used auto-invest in a reckless way or have intentionally accumulated high-risk loans to skyrocket their profits. Greed is..not so good sometimes!
It is also true that there wasn’t much knowledge about P2P investing some years ago and some loans were more dangerous. Now there is information available and it is easier than before investing in powerful P2Ps like Bondora.
Bondora recovery rate is getting better year after year.
The process for investors to become profitable, or more profitable, may include knowing the best method to sell late or defaulted Bondora loans.
Am I losing money on Bondora?
Let’s say you are an investor and you can choose between 9% and 30% yearly interest rate. Let’s be honest, it’s easy to make the mistake of heading towards the dangerous 30% loans. I understand that.
Many old Bondora users may have some late or defaulted loans in their portfolio. They want to get rid of it because they believe that money is lost forever.
I have analyzed the typically low-quality portfolio and established the procedure I would apply in a situation like that if it was my portfolio.
I also went through what is on sale on the Bondora secondary market and collected information about what investors are ready to pay for defaulted loans.
This is not a financial advisory service. This is my humble investor opinion. These strategies are not proven to work for everyone. What worked for me may not fit your needs. Collect as much information as possible before investing.
- It is absolutely normal to have late and defaulted loans
- Investors with low-risk tolerance should limit exposure to risky loans
- It is clever to consider selling some unfruitful loans in certain cases
- Bondora is a long term investment but it is smart to keep a profitable setup doing mindful adjustments
- Finnish credit scorings may be less reliable
- Finnish and Spanish late loans recovery can be slower
- HR loans can be sold successfully only applying huge discounts
- HR loans have a historical recovery rate between 20% and 60%
- When a loan is recovered, also a part of the unpaid interests might be recovered
- There are advanced investors who buy highly discounted overdue and defaulted loans in the hope of earning late and overdue charges from these
- As an ordinary investor, it may make sense for me to transfer part of the risky loans to bargain hunters in order to cash in something to reinvest and make immediate new profits
How safe is Bondora?
Most high rated Bondora loans are repaid regularly. Some of the loans with very high interests can default or be late. This is why it is normally better to stick to the highest ratings and be happy with lower yields (… is 15% too low for you?).
The worst thing that can happen to my loans is that not even the first instalment has been paid. That way my money is stuck and did not produce any revenue. Most defaulted Bondora loans share this characteristic.
The default rate for F and HR Bondora rated loans is very high, so I believe it is better to avoid or limit exposure if I want a smoother and safer portfolio or if I am not an expert investor.
There are smart advanced strategies to buy “safer” D, E and F class loans on the secondary market and soon I’Il write about it.
Overdue loans can be sold/bought at a discount up to -95%!
If Bondora then manages to recover e.g. 30% to 40% of the defaulted loan, it turns out to be an extremely successful operation for the bargain hunter.
Let’s stop lingering on theories and go to the actionable.
How to sell my defaulted Bondora loans
Action 1 :
- I access my Bondora account
- I go to Bondora secondary market page
- I need to list the loans using the filters available, to do so, I click on the magnifier on the top right of the screen and a smaller window appears
There I select:
- Bondora rating: HR
- Status: 60+ days overdue
- Secondary market: Investments not on sale
- Countries: Spain, Finland
- Go to the top centre of the screen to: “Average discount/mark-up” and set what is a fair amount of discount for you (50% to 90% can be reasonable)
- Now apply the discount using the button on the right and then go to “add all” button on the top right of the loans list
- At this point, I’ll see a blue button on the left with the number of loans I am about to sell
- I think twice about what I am doing and, if I am sure about my decision to sell I proceed
- A pop-up will open where some more options are available. I can choose to sell my loans as a closed portfolio or just sell it as they are one by one.
- The total discount applied is shown on the pop up, so I can see what is the amount of money I am going to “lose” if the loans will be successfully sold. It is the price I am ready to pay in order to cash in a part of the late loans and reinvest immediately on fresh and more reliable loans.
- A few more options are available but I skip it for now and proceed.
- The only step left is to sign the sale contract, so normally an SMS security message is sent to me. I copy the 5 numbers code into the box and proceed.
- Now my loans are on sale.
Action 2 :
I repeat the above procedure for class “F” overdue loans.
This time I apply a discount between 20% and 70% or somewhere reasonable for me.
Action 3 :
Rinse and repeat the above procedure for all loans up to the “AA” class I can sell as a portfolio to speed up operations.
Only in case, I have a portfolio made by few but big loans, it may be convenient to sell it individually and apply different discounts one by one (unlikely).
I always remember that the highest late fees are applied to the worst loans if recovered.
How much discount do I apply to late Bondora loans?
I normally apply discounts between 20% and 90% but this is very personal.
If I have time to spare on this, the best would be to first apply a lower discount, then increase it if the loans are not being sold in a given time span. I’d start to apply 50%, wait 2 months then apply 90% if nothing happened.
When selling as a portfolio I also check the 2 last checkboxes in the window:
I do not sell the HR class Estonian loans if not in a hurry. The chances of recovery are just too high and it’s absolutely worth the waiting in my opinion. Even a partial recovery of the late fees makes it worth the waiting and the risk of losing the entire principal.
How to choose if to sell as a portfolio or loan by loan?
I find it reasonable to put myself in the shoes of the buyer for a second.
If I were up to buy late discounted loans, how can I quickly assess a portfolio value?
If it is full of mixed loans classes, durations and other differentiating factors things get slow and I may skip to the next bargain.
So the best thing to do as a seller is to fill up my portfolios with homogeneous content. As easy as this.
What is reasonable to do to minimize portfolio risk and optimize my revenue on Bondora when selling loans?
Before selling a loan there are some factors I want to control.
The “columns” I need to mind the most are:
- Purchase price: How much I’ve originally paid for my loan
- Discount/mark-up: At what percentage do I want to discount or mark-up (premium)
- Expected income: If someone buys my loan, how much can I expect to receive
After some weeks it is likely that a part of the loans I put on sale have been sold, so my money will be available again on my account.
What can I do after the sale of my defaulted Bondora loans?
- I cash in and transfer funds back to my bank
- I buy new loans
- I cash in and transfer funds to the Go & Grow Bondora tool 6,75%
- I cash in and move to other P2P platforms to get diversified loan types
How to sell all loans and switch to Bondora Go & Grow
If I go to “My investment” section on Bondora I find a big blue button that can simplify my transition to a more relaxed Bondora portfolio.
The button is: “Add your existing investments to the Bondora Go & Grow account”.
In less than a minute a Bondora software will analyze your situation and make you an offer for your entire portfolio.
The offer is typically 20 to 40% of the portfolio value, but It depends and I don’t have enough data to say it 100% sure.
This option is undoubtedly convenient for mean investors, especially those that are short of time to manage secondary market sales.
Accepting the Bondora go & grow offer all your assets will be transferred in a Go & Grow portfolio that gives a fixed interest of 6,75%.
The operation is not reversible.
I would not accept that offer unless I really have many defaults and no will to wait or manage the issue.
One more interesting thing is the liquidity created by this option.
Conclusions and takeaways
P2P lending investing is normally a rather handsoff operation, that’s why I (and thousands of investors) love it, but sometimes interventions are needed.
P2P loan investing is very profitable for me and I take into account that defaults happen and are part of the process. I have to deal with it and focus on making more profit out of it when possible or limit the losses.
I never forget that money has to work for me and what gives me power is the compound interest. Every euro stuck is not “working” and I should address the problem sooner or later. Complaining is not a solution, nor it will be in the future.DIY investors deal with problems instead of screaming -it's a scam- or giving up things. Click To Tweet
If you are a Bondora investor and you have alternative solutions to suggest, please do share your thoughts in the comments!