P2P April Update
Another month, another update of how the investments are performing.
First of all, I will show the breakdown of the investments by platform.
Mintos continues to be the platform with the majority of the capital invested (67,04%), simply because it’s the platform with more loans to offer. Thus more possibilities to invest.
Another important aspect is the returns by platform.
In terms of returns, the winner is Bondora, although with a lot more risk, because unfortunately, the loans don’t have buyback guarantee.
Personally, the platforms that I am investing with are Mintos, Viventor, Twino, Bondora, and Raize.
I will share some thoughts, from my short experience, and try, to sum up, the positive aspects and some aspects that everyone should be careful.
- High-Interest Rate: These loans have superior Interest rate (and more risk) when compared with another type of investments like for example deposits or bonds from governments and large-cap companies (and more risk). I have loans with interest rates from 7% to 11,5% depending on the platform and loan;
- Loan Type: With this platforms, I can control the type of loan that I wish to invest (Business, Mortgage, Agricultural, Car, Personal, etc.);
- Loan Risk: I can have some control of the risk that I’m taking (There are ratings that usually go from “A or AA” – more safe to “C or F” – consequently not so safe, high risk). Some have buyback guarantee option, where you will be repaid if the loan is late by more than 30 or 60 days depending on the platform;
- Minimum Amount to invest: Platforms have very low minimum amount to invest in a loan. This means that it’s possible to diversify into more loans and therefore decrease the risk. The minimum amount goes from 5€ to 10€ depending on the platform. Additionally, the minimum transfer – to start investing – into these platforms usually is around 50€;
- Country to Invest: In some platforms, you can choose the country where you wish to invest your money;
- Currency risk: Gradually I’ve been seeing the possibility to invest in different currencies, and this is great because I prefer to invest in my own currency, therefore eliminating the additional risk;
- Secondary Market: Normally you have the possibility to sell your loans in a secondary market, where you can sell it more expensive, cheap or for the same amount that you have invested in (Personally I never sold any of my loans);
- Skin in the game: The platforms with loan originators (originate loans and are responsible for vetting the borrowers) are required to maintain a certain amount of their own money in the loan. Usually from 2% to 15%, depending on the platform and loan originator;
- Auto Invest: All platforms have the “Auto Invest” option, where you can define which loans you want to invest (characteristics), and the platform will automatically invest in those type of loans – as long as they exist and you have money available;
Aspects to be careful:
- High risk: With the high-interest rate, comes high risk as I mentioned before. These are loans normally to individuals or small (very small) business, as a result the risk, in my opinion, is far superior in comparison with another type of investments like bank deposits or even bonds from bigger companies. Thus everyone should be very careful. Personally, I try to mitigate that risk, by investing small amounts of money in each loan; and trying to invest the majority of my money in “buyback guarantee” loans. Additionally, I only invest in EUROS, mitigating currency risks;
- A low number of loans: These platforms are being victims of their own success because some of them are having difficulty to find new loans to invest in. As a result, right now for example in 2 of those 5 platforms, I can’t find any loan (current) to invest in. Buyback Guarantee loans are even harder to find;
- Buyback Guarantee: I believe this buyback guarantee is secure as long as the loan originator doesn’t go to bankruptcy. So it’s a good thing, as long as the companies involved honor their promise to pay the loan. Be careful! Personally, I try to diversify among different loan originators.
That’s all folks. If I have something new to say (or correct), I will update this post.
I have several LATE loans; means that I have loans that are late in their payments. Fortunately, these are all “Buyback Guarantee” loans.