NEO Finance p2p lending platform review

Published by Daniel on

(Last Updated On: January 20, 2019)

NEO Finance is a peer to peer lending platform from Lithuania. It has more than 5000 active investors and the average return rate is about 14%. You can see more statistics about NEO Finance here.

It offers a wide range of loan types: consumer loans, refinancing, house repair, car, health costs, real estate purchases, travel and others.

NEO Finance is a true p2p lending platform. People apply for loans on the platform, NEO Finance does a credit risk assessment and sets an interest rate for the loan, and then investors need to fund the loan.

If the loan is not funded, it’s removed from the website.

What sets Neo Finance apart from other peer-to-peer platform operators is that it holds an unlimited e-money institution license. This allows Neo Finance to operate anywhere in the EU.

The platform is similar to a banking system. Every user account has its own personal IBAN account. So, you don’t transfer money to Neo Finance, but to a Lithuanian bank account under your name. This provides an additional safety net for your capital. You can also choose to use that IBAN account for payment transactions as with a classical bank account, instead of using it for p2p investment.

Key highlights

  • true p2p lending platform
  • interest rates between 6% and 27%
  • loans rated based on risk from A to D
  • buyback guarantee for 50% to 80% value on the defaulted loans
  • provision funds available to cover the payments if the borrower is late
  • some fees when withdrawing money (0.29 EUR)
  • loan terms up to 5 years

My portfolio on NEO Finance (as of January 2019)

Started investing: November 28th, 2018

Deposits: 500 EUR

Current value: 488.23 EUR

The value of my portfolio is currently lower than my initial investment because I paid a fee for all my investments to use the provision fund. I want to keep this account as low maintenance as possible, so I don’t want to worry about loan defaults and selling my investments back to NEO Finance.

Maybe it wasn’t the best idea economically, but it makes me feel safer. Instead of an annual return of 17.66% on my investments, now I’m expecting an 11.66% return. That’s still good.

By next month, the interest payments should cover my initial investment so I’ll be starting making profit.

 

invest in Mintos

Creating an account

You can open an account from all over the world. You’ll need to provide proof of identity (ID card or passport) in order to get an IBAN account.

Adding funds to your account

Adding money to your account is surprisingly fast. The Neo Finance platform offers you a personal IBAN number to add your money into. During banking hours, it takes less than 30 minutes to transfer money to your account.

If your daily account is not a EUR and you want to save up some currency conversion fees, you could use Transferwise. If you don’t have a Transferwise account, you can create one here.

Investing in Neo Finance

Manual investment

neofinance manual investment

The manual investment option is very minimal. It lets you see the loan rating, interest rate, loan term and how much is still available for investment. Besides this, you don’t have an option to filter the loans based on any of these features. Some of the columns have a sorting option, but the Interest rate column doesn’t have it. You’ll need to scroll down the list of available loans and pick the ones you’re interested in. I’d usually open them in a different tab and check out their details from there.

neofinance loan details

You can see more details about a specific loan on the loan page. The borrower details include age, income, work experience and sector, other loans and debt history. On the loan details section, you can see the estimated return based on the amount you plan to invest.

There’s also this nice check to enable/ disable the Provision fund service. If the provision fund service is enabled, you’ll expect a lower return from the credit, but in case the borrower is late with their payments, NEO Finance will cover the payments. Neofinance will use the money accumulated in the provision fund to cover the payments the investors would otherwise miss.

NEO Finance offers also a buyback guarantee policy. If you don’t choose to enable the provision fund service and the loan you invested in defaults, you can sell it to Neofinance for 50-80% of the loan value, depending on the loan risk rating.

You can view the status of your investments on the My Investments page.

neofinance my investments

Manual investment in the secondary market

neofinance secondary market

You can buy loans from other investors on the secondary market. Surprisingly the secondary market page has all sorts of options for filtering the loans that the primary market page is missing.

Auto-invest

neofinance auto invest

The auto-invest feature lets you create different profiles for the primary and secondary market. It lets you choose the amount you want to invest into a single loan, the loan rating, interest rates and loan term. You can also choose to enable the provision fund service. You’ll get a lower interest rate but you’ll never miss a payment.

For a more granular control of the auto-invest portfolio, you can choose the type of loans you want to invest in, the loan amount range and many details about the borrower: education, age, gender, available assets (car, flat, house), marital status, work experience, even if this is their first loan or not.

Conclusions on NEO Finance

Your money is safe

I like the e-money license institution approach NEO Finance is using. You have your own IBAN account in a Lithuanian bank. In case something happens with Neo Finance, your money is safe in your bank account.

Good interest rates

The interest rates offered to vary from 6% to 27%. These are above the rates offered by other platforms, for example, Mintos.

Auto-invest feature

The level of granularity the auto-invest feature offers is fantastic. You can also set up an auto-invest strategy on the secondary market loans.

Buyback guarantee

The buyback guarantee feature is a bit different than the one offered by other platforms. NEO Finance will buy bad loans from you at 50-80% of the loan value. You won’t lose all your money, but you’ll still lose a part of it.

The Provision Fund service is a nice touch and it looks like a sustainable model. It’s something similar to loan insurance. You pay a monthly small fee that accumulates into a fund and defaulted loans or late payments are covered from this fund.

The website

The website is a bit slow and the user interface could use some more features, like filtering the primary market loans. Overall, the platform still offers a good experience though.


Daniel

Learning and sharing what I learn about alternative investments.

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