Top 8 European P2P Lending Platforms
Peer to peer lending is a concept that has gained popularity during the past 10 years. In a nutshell, individuals or companies lend money to other individuals or companies in return for interest when the loan is paid back.
Most of the p2p lending platforms offer loans originated by other lending companies. These companies publish their loans on a p2p lending platform and investors can choose to invest in parts of the loans in return for an interest rate paid in instalments plus the principal paid back at the end of the loan term.
So let’s say person A has borrowed 2000 EUR for a year from lending company B with an interest rate of 20% per year. The company Y publishes the 2000 EUR loan on the p2p lending platform C and allows investors to invest in smaller parts of the loan for 12% interest per year. The individual investor D invests 100 EUR in this loan.
With the 12% interest rate per year, he’ll receive monthly instalments of 1% of the sum he invested, in this case, 1 EUR per month. At the end of the year, he’ll also receive back his invested principal of 100 EUR. Investor D has gained 12 EUR with his initial investment of 100 EUR. The lending platform C might also charge a 2% fee on all the loans published on its platform. The lending company B will only gain the remaining 6% interest rate from the loan it published on the p2p lending platform. But it gains liquidity and it can offer more loans to other borrowers meanwhile. So everybody’s happy.
How are investors protected
Some p2p lending platforms offer investor protection with policies like buyback guaranteed of payment guaranteed. This means that if the loan defaults or the payments are late by a number of days, the p2p lending platform will either give your money back or cover the missed payments until the borrower restarts paying his loan again.
Other platforms offer better interest rates to the investors, 20% or more, and advise investors to diversify their investment portfolio into multiple loans. With enough diversification, even if a few loans default, you should still make a profit.
P2p lending platforms are also regulated by financial authorities. They need to implement specific rules like keeping investors funds separated from the company assets or ensuring that in the case of bankruptcy the loans will be taken over by an administrator.
There are many European platforms that provide peer to peer loans to everyday investors. Some of the ones I like and I’m currently invested in are below.
Mintos is the biggest p2p European lending platform. It has around 130.000 loans on their platform for you to choose from. More than 1.3 billion EUR worth of loans were funded on the platform so far. It offers interest rates around 10-12% and also provide a buyback guaranteed policy for loans that are 60 days or more late.
As Mintos, Twino is another Latvian company that offers p2p loans to its investors. It offers similar interest rates as Mintos but it has fewer loans available on their platform. As a plus, they have a policy named payment guaranteed. If the borrower is late with the payments, the platform will cover the payments for them and you’ll still receive your money.
Grupeer is yet another Latvian p2p lending company that offers consumer loans at around 14% interest rate. All loans offered by Grupeer have a buyback guaranteed policy. If the loans payments are more than 60 days late, Grupeer will buy back the loan for you and repay you the interest it owed you for that period.
Grupeer also offers real estate development loans on their platform. Companies borrow money from Grupeer for development projects and Grupeer offers these loans to individual investors on the platform.
Another interesting service Grupeer offers is its “stability fund”. You can buy shares in a real estate property and receive long-term rent at about 4% to 8% per year return.
Neofinance is a Lithuanian company that offers all sorts of loan types: consumer loans, house repairs, real estate purchases, refinancing loans, etc. The returns for investors are around 14%.
Neofinance has a slightly different buyback policy than other platforms. If the loan is late or it defaults, it will buy it from you at around 50-80% of its value. The rebuy per cent depends on the risk profile of the loan. Neofinance does have however a concept named “Provision fund”, where you can automatically put a certain per cent of your potential profits. If the loan payments are late, the payments you are owed will be covered from that Provision fund.
What makes Neofinance special is that it operates under an unlimited e-money institution. This means you have your own EUR IBAN account in a Lithuanian bank when you open an account with them. You can use that account for all sorts of stuff unrelated to Neofinance loans. You can make payments, deposits, withdrawals from other accounts, etc. This also means that if Neofinance goes bankrupt for some reason, your money is safe in a bank.
PeerBerry is a p2p lending platform that is only 1 year old. It offers short-term loans at about 10-12% interest rate. It also has a buyback guaranteed policy so if the loan payments are more than 60 days late PeerBerry will buy back from you the loan and pay you the interest owed.
Fast Invest is a UK p2p lending platform that offers loans in EUR and PLN at around 13-15% interest rate. It also has a buyback policy that states that they will buy back the loan from you if it’s more than 3 days late. You can also sell your share invested in a loan back to Fast Invest at any time you want. This is especially great if you need to free up your capital fast, for whatever reason.
EstateGuru is a peer to peer lending platform that offers short-term loans backed by property loans from Estonia, Finland, Latvia, Lithuania, Spain and UK. The historical return rate rate for investors is at around 12%.
EstateGuru doesn’t offer a buyback policy as other p2p lending platforms do, but their default rate is less than 1%. Also, each loan uses a real estate property as collateral, so the loans are pretty secure.
Bondora might be the oldest p2p lending platform in Europe. You can choose from one of the many auto-invest options it offers. You can start investing with only 1 EUR and the average returns for investors are around 10%. However, Bondora doesn’t have any buyback policy. Because of this, I don’t really know if it’s a good idea to invest your capital here.
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