P2P Lending: Be a Mini-Investor and Get ~ 10% Interest a Year
The Story of Traditional banks, Czech Republic
5 years ago a new bank established in the Czech Republic called ZUNO. In that time they offered a revolutionary saving account with 2.5% interest a year. You could move money as you go and you could get a tiny interest paid every month. Despite I was a poor student that time, I was so excited to have the account and be able to move money between normal and saving accounts all the time and get as little as 5 CZK interest every month with the hope that one day I will become rich.
As the time flies, the bank changed. Many new banks appeared on the market with similar interest just to attract new clients and once they reach a good amount of customers, the interest went down. Today ZUNO offers his historically lowest interest 0.05% a year. Sick, right? Just 5 years. Another modern bank Airbank that started a couple of months after ZUNO started with similar interest. They had an ad that they are not like normal banks and that they will KEEP ALWAYS TOP3Â guarantee interest in the Czech. They just stopped the guarantee and today they offer interest just 1% with a condition to pay actively with their card.
So this is the story about banks and how crappy is the interest they offer.
Peer 2 Peer Lending model story - be a bank yourself and lend your money
A couple of years back in the United States, a new business model appeared on the market that let normal people like you or me invest a small amount of cash into loans and get back an interest from it - just like banks do it. Itâs usually a platform, where borrowers (people that need money) meet investors (people that have money) with some kind of risk management.
In other words: This is John ÂŻ\_(ă)_/ÂŻ. John needs 2000 USD for a new kitchen. John will ask a p2p lending platform if they could arrange a loan to fund his new kitchen. The platform decided John is a suitable borrower with a good credit history and the risk that John wonât pay it back to investors is very low and decide to give 10% RSPN to John. John is happy and accepted it. The platform put an offer for Johnâs loan online. The platform has many people (~ investors) who could borrow John money. I am ( ͥ° ÍÊ ÍĄÂ°) actually one of these people and you can be as well. I decided that the risk is okay and I will borrow John 5 USD. Other people (investors)  will join me and will invest around 5 - 10 USD as well. We are now 300 investors and we collected together 2000 USD for John. John is repaying the loan successfully every month and each investor will get 10% interest from the amount they invested. I wonât get much money on top what I invested for this particular loan but if I will invest 5 USD in like 200 such loans (1000 USD in total, the idea is to diverse the portfolio against risk), then it gets as high as 100 USD every year.Â
The p2p lending is getting more popular in Europe and I am personally using 5 platforms to invest money - and thatâs the story about them. The risk is that some borrowers might not pay their loans but this is the magic of diversification: Investors including me usually invest the minimum amount (as low as 200 CZK or 5 - 10 EUR/GBP) to each loan so there is no drama if someone wonât pay as they should.
Mintos.com (CZK, EUR, PLN) - for Europe residents
Zonky.cz (CZK) - for Czech residents
Bondora.com (EUR) - for Europe residents
SavingStream.co.uk (GBP) - for UK residents
FundingCircle.com (GBP) - for UK residents
Terms: Loans, Borrowers, Investors, p2p lending platforms, Currencies, Autoinvest, Secondary Market
My interest: 8.45% (2.5 months ago first fund)
Community: Check independent FB Community & Discussion for investors
Mintos is a great place to invest in Europe. It is a new platform founded in 2015 with fantastic reviews. It has a great support for investors and they just launched a support for investment in multiple currencies like Czech Koruna or Poland Zloty. You can set up auto-investment to automatically invest & reinvest available money from your account to other loans - in other words, you donât need to invest much time into it except to set up some filter what return & risk you want to accept. They also offer a secondary market where you can sell your loans if youâre not happy with them or need some cash immediately.
I added there a fund 2.5 months ago and since that I invested in 121 loans. My return is lower than expected on 8.45% but zero bad debts and some coming with delays. I hope it will grow higher.
Deep review after one year from the internet
Interest: from 3.99% to 19.99% (based on risk)
My interest: 8.54% (10 months ago first fund)
Community: Check independent FB Community & Discussion for investors
This is one of the most popular p2p platform in the Czech Republic started in 2015. They are back up from PPF and you could already see them in local TV ads. The language is only in Czech as well as the currency is in the Czech Koruna so it is pretty impossible to invest for foreigners. You can choose loans & rates where you want to invest as they donât have any auto invest software. You have also the opportunity to read borrowersâ stories.
I invested in 130 loans in total with annual interest rate of 8.59%. Just two of my loans are delayed and wonât probably get repaid. They donât have any features like auto-invest or a secondary market to sell current loans yet so you have to regularly check it and invest lots of time to keep reinvesting. But they do a really good job with risk-management and the quality of loans. It might be difficult to get there as an investor now as they have queue system (I have some links to get in front of the queue if you want).
Deep Review after one year from the internet
Interest: over 10% (based on risk)
My interest: 18.82% (11 months ago first fund)
Community: Check independent FB Community & Discussion for investors
Bondora is p2p lending platform currently available in many countries across Europe. They started in 2008 and offer loans in EUR currency. For an investment, they use a primary the auto-invest software and you can choose the risk rate that you are willing to take. Currently, they offer risk strategy Conservative with 11.92%, Balanced with 14.38% and Progressive with 15.53% expected return. They offer also a secondary market where you could sell your loans.
They have quite bad reviews but so far my interest is far above expectation with their risk strategy Balanced - above 18% and I invested in 472 loans in total. I have many delayed loans but it shouldnât have a big impact unless it gets worse. Before investing I recommend to go through the reviews so you can decide yourself.
Deep Review from the internet
My interest: 10.68% (2.5 months ago first fund)
SavingStream offers loans for UK properties instead of people and they keep the annual interest around 10 - 12% stable. It becomes pretty popular but because of many investors joined the platform recently, it is more likely that they will move the interest a bit down to match the average UK market (5-7%) but this is just my hypothesis.
I started with it just 2.5 months ago and since that I invested into 72 loans. My interest is on 10.68% with zero bad loans. Despite itâs a pretty early for these data to be valid, there is one interesting fact: since their existence, they had just one bad loan which is an exceptional result. They donât offer any auto-invest strategy so you have to also spend a lot of time looking for the marketplace if there are loans available.
Deep Review from the internet
My interest: 5.94% (2.5 months ago first fund)
Funding Circle is a p2p platform founded in 2010 and focusing on the UK market. The different is that you donât lend money to people but rather to small and medium UK businesses. They are well evaluated with their risk-management and the interest rate should be around 7% a year. The highest benefit is that the review is excellent but you wonât be able to join the platform if you donât have a UK address.
I added a fund two and a half months ago and currently I have 63 active loans in businesses. The return is not any high but I found two benefits: I started to invest when the GBP currency was on the highest down so I hope it will growth together with the fund and the second thing is that they have auto-invest - I donât need to spend any time on it.
Deep Review on the internet
Other important information
If you want to invest in a different currency than on your bank account, then transfer money through TransferWise - it is the easiest and safest way with very low fee.
If you want to join FundingCircle or Bondora, please write me an email on [email protected] and I will send you a recommendation link - we both get some reward for it. In FundingCircle it is 50 pounds and in Bondora it is lower but better than nothing, right?
For investor - calculate your yearly return on investment with this smart tool.
Read more in Forbes: Why You Should Invest In Peer-To-Peer Loans In 2017
Other p2p lending platforms:
Interesting fact: Before I finished the article, I got an email from my bank ZUNO that the interest is going down to 0% per year and they will prepare for closing the bank and moving all clients to Raiffeisen bank. RIP.
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