John Carson, Author at Peer & Social Lending

Peer to Peer Lending Sites → 24 of the World’s Best

May 4, 2017 by John Carson 9 Comments

Todays post is by Chris Grundy of Bitbond. Chris is a Bitcoin obsessive and avid p2p lending fan who has written for a variety of Online publications as well as regularly contributing to the Bitbond blog. You can follow him on Twitter, connect with him on LinkedIn or check out his Marketing blog. Any feedback is welcome and encouraged.

It is fair to say that the p2p lending industry is having a stellar year. As you will be aware, Lending Club reported an extremely successful Q2, breaking through $1.9 billion in originations in that quarter alone. During the same time period, Prosper issued a staggering $912.4 million in new loans, representing a 147% increase year-over-year!

The U.K. is equally as impressive with $792 million being lent over p2p platforms in Q2 according to the Peer-to-Peer Finance Association.

So how can you take part and profit from the p2p lending boom?

Well, the first thing you need to do is find the right peer to peer lending site for you in order to start investing and saying goodbye to the 2.5% interest offered by your bank. Below, I have listed my favourite peer to peer lending sites from around the world for you. Have a look and let me know in the comments if you think I have made any glaring oversights. Enjoy!

I will only focus on peer to peer lending sites and not Marketplace lenders. Thus, not included: Kabage, OnDeck, SoFi, Funding Circle

Global

Bitbond

Using bitcoin as a payment network, Bitbond gives investors access to higher interest rates from around the world at zero fees. Below is a table comparing fee structures across platforms.

Besides the minimal fees, Bitbond offers the AutoInvest tool (video) which allows larger investors to set clear investment parameters and then automate the investment process, saving time as well as money.

Potential bitcoin investors might also be won over by the weekly borrower interviews which are published on the company blog, and let lenders to read up on the people they might want to invest in.

The average interest rate on Bitbond currently stands at 25% and you can invest as little as $2.50. Check out Stu Lustman’s quarterly returns reports to see a comparison between fiat and bitcoin ROIs for lenders, and have a look at one of the most lucractive bitcoin affiliate programs around.

The U.S.

1. Lending Club

I think it is fair to say that Lending Club is the favourite among U.S. peer to peer lending sites. Industry heavies such as Simon Cunningham (Lending Memo), Peter Renton (Lend Academy) and Ryan Lichtenwald from this very blog (and Lend Academy), have all extolled on the platforms virtues and have recorded their impressive ROI’s, coming in at 13.3%, 11.30% and 10% respectively.

Average investors can expect to enjoy a healthy ROI of 6-8%, which might seem a little disappointing when compared to the professionals, but should nevertheless be considered very attractive.

Lending Club also let you invest $25 per investment which makes it possible to further diversify a smallish investment total, and have a very good credit scoring system in place.

2. Prosper

Prosper suffered a rocky start. Not controlling pricing in the early pre-crisis years really hurt their returns in the critical 2006-08 period. Prosper also fought the SEC on who should regulate the industry and paid greatly for it. Having put this behind them however, the peer to peer lending platform has enjoyed explosive growth in recent years.

This growth comes mainly from Prosper’s newly acquired reputation as being a very solid way of earning extra cash. Since 2006, they have paid more than $140 million to their investors, with average ROI ranging between 5-9%. Additionally, Prosper’s evaluation of borrowers and the subsequently high quality of loan requests has helped build their reputation as a safe haven for investors. Specifically, their average credit score for borrowers is an impressive 700.

3. Upstart

Upstart might not have the same loan volume of the two giant peer to peer lending sites in the U.S. but it has some interesting characteristics that may well make it intriguing for investors. One of the biggest bugbears p2p investors usually have at Lending Club and Prosper is that when a loan defaults it is the investors, not the platforms that take the hit.

With Upstart’s approach, if a loan defaults at any time over the course of the loan term, then Upstart will take the revenue they earned from the origination fees and refund the money to investors.

Upstart’s origination fees range between 1% and 6%, which may well prove an attractive remuneration for peer to peer lenders who have seen an investment go south.

A further feather in the p2p lending platforms cap, is the impressively low default rate which can be explained by extremely tough admissions process for borrowers

With this in mind, expected ROI for investors is significantly below the previous platforms, coming in at 4-8%.

4. Peer Form

Peer form is one of the oldest peer to peer lending sites on this list, despite only coming to prominence recently with another successful round of funding. Special features of Peer Form include their emphasis on accredited or institutional investors and their focus on three-year loan terms. Interest rates stand between 7-28% with over 14 different loan grades.

Borrowers must have a minimum FICO score of 600 in order to apply for a loan, and as of today, there are about 70 loans on the platform with a majority of these commanding 20%+ interest rates.

5. Kiva

Kiva came up with a really good social idea. It is an US non-profit organization with the mission to connect people through lending, with the main goal of alleviate poverty. Kiva was founded in 2005 and has up to 1.382 lenders in 83 different countries.

In just 5 years, Kiva has distributed over $240 million borrowed by more than 620,000 people around the world, contributing to the improvement of about 615,000 lives. Of that borrowed amount, only about 1.58% has not been fully paid back.
Kiva’s work is pretty interesting. It works with microfinance institutions all around the world - whom they call Field Partners. One of the reasons why this project is so successful is related to the fact that one can only donate as low as $25.

India

1 Faircent

Founded in 2011 by Rajat Ghandi, Faircent aims to provide credit on demand for all Indians. Having aced the lender acquisition in recent years, Ghandi now states “today our challenge is to provide credit-worthy borrowers to our over 2,500 lenders.”

It seems like Faircent is up to the challenge, raising $250,000 in a pre-Series-A funding in June, and recently raising an undisclosed fee from Mohandas Pai. Perhaps unsurprising considering that 78% of Indian population does not have access to personal loans from banks or NBFC.

Since it’s inception, Faircent has processed over 300million Indian Rupees, around USD4.6million and boasts average interest rates of over 20%.

2. i-lend.in

In India, asset classes are few and tightly managed from a risk/return perspective, and not many asset classes exist where high earnings can be made. The returns on peer to peer lending sites like i-lend represent a welcome change therefore, bringing in between 16% to 20,75% on average.

With this in mind it is important to note, that peer to peer lending is still unregulated in India, meaning that lenders have much less protection here than in other regions covered on this list.

Additionally, fees for lenders on i-lend are 1.5% of the invested amount and there can be numerous factors to consider before investing as explained here on p2p-banking.com:

A typical P2P transaction involves multiple lenders lending to one borrower. In case the lender changes his mind about lending or there are delays in collecting cheques (lenders can be based anywhere in the country), the borrower may not get their money on time – this can be weeks, sometime months.”

That being said, p2p lending clearly has a huge amount of potential in India.

Europe

1. Bondora

Bondora is one of the most exciting peer to peer lending sites out there today. This is because of its documented high yield returns for the 9,000+ investors who have signed up.

Perhaps the most prominent among these is Claus Lehmann, (wiseclerk) author of p2p-banking.com, who has documented his returns from the European p2p lending platform. Below is a screenshot of his returns in which he showcases his average of 26% ROI on Bondora to date.

Bondora has issued over €45 million in loans since 2009 and serviced over 100,000 borrowers across 3 countries.

2. Prêt d’union

Prêt d’union, founded in 2009, has become the largest peer to peer lending site in France, having granted €228 million in personal loans so far, and paid out over €9 million in interest to investors.

Having grabbed $34 million from Eurazeo, Pierre Kosciusko-Morizet as well as existing investors in July of 2015, Pret d’Union is perfectly placed to expand into the rest of Europe and become the continents dominant force.

Interestingly, the French peer to peer lending platform offers lenders 4 types of investments which are:

Conservative & short duration
Conservative & long duration
Balanced & short duration
Balanced & long duration

Yields for lenders are superior to those offered by banks, but mild in the p2p lending climate at 4-7.5%. For more information check out this interview with CEO Charles Egly.

3. AuxMoney

Aux Money is currently Germany’s biggest peer to peer lending site, which has reportedly financed over 32,000 loans totalling a volume of more than €180 million, since its inception in 2007.

Despite the relatively low loan volume, when compared to it’s US counterparts, Aux Money is perhaps the most dominant regional p2p lending platform in the world, with a study (untertaken by Händlerbund) suggesting that the German lending giant commanded 2/3 of the domestic market.

Investors can expect to pay 1% of their invested amount as a fee to Aux Money, while borrowers pay €2.50 a month plus a one-time fee, 2.95% of the total borrowed amount.

Returns for lenders average 6.7% per annum, with investments usually ranging between €3,500-€4,500. Interestingly Aux Money has an acceptance rate for borrowers of 20% meaning that only 400 of the 2000 daily applicants are accepted and are allowed to publish a loan.

Good news for the roughly 13,000 active investors.

4. Lendico

Lendico is a Berlin-based peer to peer lending site which was founded in 2013 by the ubiquitous German incubator Rocket Internet. Having expanded to Spain, Poland, Austria, South Africa and the Netherlands, you could argue that Lendico is the first multinational p2p lending platform.

Loans on the platform are SME or personal loans and fall somewhere between €1,000-€150,000 in Germany. As on many other platforms, the perceived creditworthiness of the borrower determines the interest rate he has to pay, and the subsequent ROI investors can expect.

At present interest rates can be considered mild in the current climate, starting at 2% and climbing to 8.8% for the highest risk borrowers.

6. Zencap

Zencap is another great example of the rude health of the European peer to peer lending industry, having raised €230 million in investments from Victory Park Capital in June of 2015.

Flush with cash, Zencap now aims to provide small and medium sized business located in Germany, Spain and Netherlands with €5,000 to €250,000.

Intriguingly, Zencap is another Rocket Internet company, meaning it is in direct competition in the p2p lending space with its sister Lendico. For investors, loan terms range from 3 months up to 5 years, with the latter being the backbone of the business.

Experiences on the platform seem to be mixed, as German investor Martin R. explains in a guest post for p2p-banking.com. With yields of around 5.7% Zencap will have difficulty competing with alternatives such as Bondora, Aux Money. Below you can see a screenshot of his portfolio diversification across credit ratings.

Martin, despite his diversification, like most other investors on Zencap, did no experience any defaults on his investments. With a relatively week ROI however, this might be expected.

7. Cashare

Cashare is the leading platform in the expanding Swiss p2p lending space, which grew by a respectable 36% in 2014.

Interest rates on the platform usually lie between 7.7% and 9.9% with 58 loan requests currently available for investment. Additionally, Cashare supplies loans to applicants with varying purposes, whether to finance their education, pay their medical bills or hire a nanny, meaning that lenders can find higher interest rates if they wish to up the risk.

8. Smava

Having raised close to $30 million in several funding rounds, Smava is the up and coming peer to peer lending site in Germany, despite being a presence in the space since 2007.

Since then the German p2p platform has facilitated over €150 million in loans, with an annual ROI for investors of around 6.7%. Smava has a couple of cool features which make it interesting for investors such as the “bidbot” (Bietmaschine) which can be set to invest your money automatically along parameters you choose.

Unfortunately, Smava has the highest fees for investors I have seen in Europe. 1.35% of the total invested amount is taken off as a fee. Borrowers can expect to pay 2.5-3% as a fee.

9. Mintos

Mintos is perhaps one of the most exciting peer to peer lending platforms in Europe today. With over 14,574 registered investors and boasting an average ROI of 12.86%, Mintos is definitely seem to be making all the right moves.

What makes Mintos special, is its use of collateral. As investor Marco Schwartz wrote in his guest post, every loan is attached to collateral, meaning that if a borrower should fail to repay, whatever item he or she placed as collateral will be taken to reimburse the investors.

Interestingly, Mintos also offers to buy certain bad loans back from their investors. Thus, if you invest in one of the specified loans, and the borrower defaults, Mintos will buy back the bad debt at a reduced price, but leaving you a little less out of pocket.

10. Smartika

Smartika is a p2p platform that was founded in Italy in 2008. Back then the p2p lending system was not well understood and well seen by banks and institutions in general. It took Smartika four years to get the right regulation and finally at 2012 it was a fully licensed Payment Intermediary, authorized by the Bank of Italy to operate in the p2p field.

The italian platform is now doing quite well: they just exceeded 20 million loans, with an average rate of return of 6% and about 5,791 active lenders. In an interview, Maurizio Sella, CEO of Smartika, talked about his beliefs on the exponentially growth potential of the italian p2p market.

11. Prestiamoci

Prestiamoci is another italian p2p platform, founded in 2014 and also authorized by the Bank of Italy to operate in the p2p field. The platform has already funded about 175 thousand euros, with the average revenue margin of 4%. For now, Prestiamoci has more than 450 lenders and disbursed 360 loans so far.
The startup is supported by Digital Magics, an italian business incubator. Responsible for investing on Prestiamoci and for providing strategic support to it, the incubator has accomplished a gain of 300% on the transaction.

U.K

1. Zopa

Zopa will always be the first peer to peer lending platform! A pioneer in the field, the UK-based website has seen losses increase in 2014 however, despite a sharp rise in revenue. Still, Zopa’s importance for the UK p2p lending ecosystem can not be overstated. They processed $408 million worth of loans in 2014, which makes their European counterparts pale in comparison.

With current monthly returns for investors of 0.7% to 0.8%, Zapo is still a little away from the 9% ROI their CEO aspires to.

2. Rate Setter

RateSetter has had a stellar 2014 and is now the largest peer to peer lending platform in the UK, processing over €400 million in 2014 alone. Backed by the star fund manager Neil Woodford, RateSetter has doubled its revenues in the space of a year.

Boasting an annual return of 6.1% to investors, it might be a little difficult at first to see how the platform has enjoyed such explosive growth. If you keep digging however, you quickly realise that the low interest rates are indicative of the safety (low default rates) experienced by lenders throughout the 6 year loan terms.

With the long loan terms in mind, we may well see a upward correction in default rates on RateSetter, as loans mature and default probabilities rise. Until then, RateSetter will stay a force to be reckoned with in the UK peer to peer industry.

3. Assetz Capital

Assetz Capital is one of the UKs leading peer to peer lending sites, with over 10,228 registered investors on the platforms. Having just exceeded its fundraising target of €2.5million in May of this year, and recording 300% year on year growth, Assetz Capital looks to have a bright future ahead.

What makes Assetz Capital special, is its focus on providing loans to SMEs and property developers in the UK. Consequently, the p2p lending site focuses on larger loans averaging around 400k.

For investors, attractive interest rates hovering between the 8-15% mark, promise healthy ROIs. Additionally their “underwriting team always takes security so that if there was a default, the assets takes as security should comfortably cover the value of the loan.”

4. Thincarts

Thincats is a p2p lending platform that operates throughout the UK. As many other platforms in this list, they also consider themselves as a good alternative to high street banks. Thincats was founded in 2011 by Kevin Caley, Peter Brown and Paul Meier, as sort as a response to the banking crisis that began in 2008.

The british platform has already raised up to 146 million pounds in loans. Borrowers can get loans from £100,000 to £3,000,000, and terms from 6 months to 60 months; and lenders must invest at least 1,000 pounds in a loan - and there is no maximum investment amount - with an average interest of 9%, meaning they should receive an attractive return on their investment.
Although having an elite public, Thincats seems to be trustworthy with high quality control.

Latin America

1 Fairplace

On the one hand, we should remember that back in 2010, Fairplace arrived with a bombshell in Brazil. It was the first p2p lending service in the country and it has processed around 2.5 million Reais, offering good interest rates and several tax benefits when compared to Brazilian banks.

Nevertheless, the platform faced an investigation by the Federal Police, who claimed that Fairplace had violated a brazilian law which prohibits companies that are not financial institutions to operate in financial markets.
Its founder Eldes Matiuzzo explained that his company did not provid loans, but instead offered a platform to connect borrowers and lenders.

2. Biva

Following in Fairplace’s footsteps, Biva is the second major brazilian p2p platform, founded in 2015. It connects companies who need working capital with people willing to invest in them. The platform facilitates loans from R$2,000 up to R$50,000 for 6, 12, 18 or 24 months. For borrowers, the monthly fees are between 1.5% to 4%; and lenders can enjoy an annual return of up to 25%.

The co-founder, Paulo David, has publicly stated how difficult it is for small business owners to get loans for their companies. Therefore, his company’s mission statement is to operate in regions traditionally under-served by banks and the banking system. So far, the platform is doing really well and has already reached up to 2 millions Reais from loans.

3 Afluenta

The Afluenta startup was founded at September 2012. The platform is a bit different from others listed here, due to its need of having a bank account. Besides from that, to ask for your loan or to invest your money, Afluenta requests that you are older than 18, born in the operational countries and have both a mobile phone and an email.

They are the first authorized p2p marketplace at Argentina and they are planning to also operate around Latin America. They have recently started operating in Peru and the next countries should be Mexico, Colombia, Chile, Uruguay and Brazil. The minimal investment you can make at Afluenta is of $5,000 and the estimated annual return is 45.3%. As a borrower, your loan can be as high as $70,000 and your returning deadlines can be from 12 up to 48 months

P2P lending in 2017 » What does the future hold?

April 5, 2017 by John Carson Leave a Comment

[This post first appeared as p2p lending in 2017 on p2plendingexpert.com]

This is the third part in a series of blog posts written by Stu and Chris on LendAcademy regarding the state of the p2p bitcoin lending industry. This article was written by Chris Grundy, Marketing Manager at Bitbond, who tries to take account of more traditional lending platforms as well blockchain-based solutions. All feedback is encouraged and welcome. Feel free to connect on LinkedIn or via email.

In August 2015 I wrote my first installment of the State of the P2P bitcoin lending industry. Since then, we’ve seen seismic shifts across the landscape, with major players declining and new ones taking their place. Here, I want to give you my perspective of P2P lending in 2017, looking at both blockchain-based and more traditional solutions.

In this post, I start off by giving a short overview of the p2p lending space as it stands right now, explaining the key developments of 2016. Finally, I outline what the future holds for both bitcoin and non-bitcoin lenders, and show why there are many reasons for 2017 to be a year of growth.

2016: a challenging year for p2p lending

According to Orchard’s quarterly report, loan originations across the US industry reached $2.045 billion in Q4 of 2016. Although this is a significant increase from the $1.85 billion reached in the previous quarter, it is still well shy of the $3.8 billion generated in Q4 of 2015. Thus, loan volume has nearly halved since last year, and major player Lending Club as added fuel to the fire with dubious investment tactics.

Further bad news from the US-market came from OnDeck, which posted big losses throughout 2016, despite promising originations. Losses for 2017 seem pre programmed, and it is unclear if new business developments can stop the bleeding.

In addition to the stumbling loan volume, charge-offs have increased more steeply than anticipated, and impending regulation in China threatens the 5,000 p2p lenders currently operating unsupervised there. 2016 has been a challenging year for the industry.

P2P lending in Europe grew despite challenges

Despite the struggles faced by p2p lenders across the pond, continental platforms have continued to grow and prosper in 2016. Bondora, the Estonia-based marketplace lender, reached €1 billion in processed loan volume for example; a significant milestone for eastern european p2p lending.

Latvian neighbour Mintos laid down an equally impressive marker, taking only a year and a half to process over €50 million in loan volume. In the UK, Funding Circle is growing rapidly, surprisingly jumping by 50% since Brexit.

Indeed, p2p lending in Britain is dealing with the potential disaster of Brexit far better than most had anticipated. The sector continued to expand in 2016, growing an impressive 39% yoy to £3.2bn, according to research from BondMason. Besides these encouraging signs of growth the industry in Britain seems to be maturing and moving into the mainstream. This is highlighted by Zopa currently seeking a banking licence, as well as the UK government making the first £1,000 peer to peer earnings tax free.

Although the numbers in Europe’s p2p landscape are diminutive compared to their US counterparts, they are important signs of growth in a young and thriving sector.

Bitcoin p2p lending: The decline of the old guard

Anyone active in the P2P bitcoin lending industry will have noticed the decline of BTCJam and BitlendingClub. Both were stalwarts in the space and regularly set up impressive monthly loan volumes in a niche yet highly disruptive sector of the industry.

So what is the reason behind their current struggles, and what does it say about the bitcoin p2p lending industry as a whole?

First let’s look at the former market-leader BTCJam. Its decline is particularly striking, as the San Francisco based platform raised more than $11 million in equity funding, eclipsing all competitors in the bitcoin p2p lending field. BTCJam didn’t throw away the money either, managing to generate over $18 million in loan volume across 20,500+ funded loans.

The twist in BTCJam’s fortunes came when CEO Celso Pitta stated that the platform was closing its doors to US customers. Since March 2016, US-based borrowers and lenders have no longer been able to open an account with BTCJam. As a result, the number of current loans listed on the platform has slumped to 0, and the subreddit has already claimed the platforms untimely demise.

In similar circumstances, BitlendingClub - another major player in the space - announced it was shutting down operations in December 2016. Like BTCJam, BitlendingClub cited growing regulatory pressure as the reason, although here the pressure came from the Bulgarian authorities.

“We’ve been contacted by regulators in Bulgaria and the regulatory requirements posed to us make it unfeasible to operate the platform, we can’t comment anything beyond that.”

Having funded nearly 10,000 loans with a total value of almost $8 million, the decision to shut down BitlendingClub is actually more of a pivoting towards a business lending platform called Loanbase. But still, it is another p2p bitcoin lending platform bit the dust in 2016.

P2P lending in 2017 | Still a viable option?

Although the skies may have briefly darkened over the p2p lending industry, 2017 will be a time of renewed vigour for retail and institutional investors. Defying the regulatory challenges which other platforms have succumbed to, Bitbond recently received its own licence making the Berlin-based p2p lending company one of the first to do so in the blockchain space. With another successful funding round of $1.2 million closed in early 2017, Bitbond is making sure that bitcoin lending remains a viable option for individuals all around the world for years to come.

Bitbond is not the only thriving lending platform in the blockchain space however, as innovative, UK-based startup BTCPop was recently acquired and has since undergone many promising changes.

Things seem to be looking up for traditional marketplace lenders as well. Just a few days ago, Prosper finally inked a deal with Soros and Jefferies which could be worth up to $5 billion. The deal stipulates how a vast quantity of consumer loans will be sold to a group of reputable investment firms over the next 24 months.

Even the troubled giant LendingClub has shown promising signs of recovery in 2017, beating Q4 estimates and signalling a significant turnaround so far.

In Germany, 2017 started off with a bang too, as AuxMoney secured €1.5 billion from Aegon. The Dutch insurance company plans to invest into consumer loans on the platform over the next 3 years. For a european platform, this is a staggering amount of money, and is a great portent of things to come.

On the flipside, this massive increase in capital will most likely create a downward pressure on rates, potentially reducing the returns retail investors are likely to make. The good news is, that with so many platforms around, you are sure to find one that matches your risk/return profile perfectly.

Thanks for reading, and let me know what you think in the comments below.

A fast-growing p2p loan marketplace from the Baltics conquers Europe

July 8, 2016 by John Carson Leave a Comment

This is an interview with Martins Sulte, CEO and co-founder of Mintos. We have previously reviewed Mintos in depth and now we get to learn more about the platform straight from the CEO.

Can you start by telling us what Mintos is about?

Mintos is a fintech startup. We operate as a p2p loan marketplace that allows investors to invest in various loans from a constantly growing number of loan originators. To put it in a broader context, Mintos marketplace functions similarly to the way Amazon does. While Amazon connects merchants selling goods to consumers, Mintos connects loan originators selling loans to investors.

By creating this service, the Mintos team offers investors an asset class that previously was not widely available — the opportunity to finance loans originated by non-bank lenders, who have traditionally funded loans using their own balance sheet. In our model, non-bank lenders become loan servicers, dispersing proceeds and collecting interest and principal payments from a borrower.

What has been Mintos marketplace’s track record so far?

Since its launch one and a half years ago, the company has seen great traction. More than 40 million EUR in funded loans have been traded via the Mintos marketplace. To date, 10 non-bank lenders have joined the platform; they provide loans in the Czech Republic, Estonia, Georgia, Latvia, Lithuania and Poland. More than 8,000 investors from 40+ countries across the world currently use the Mintos marketplace.

What return on investments can investors expect?

So far, we have seen an average net annual return of about 12.5% for investments made through the Mintos marketplace.

We encourage investors to diversify their portfolios. By offering different loan products in different geographical locations, along with a low minimum investment of EUR 10, Mintos allows investors to easily build well-diversified investment portfolios. Investors can finance business loans, car loans, invoices, mortgage loans, and personal loans on the Mintos marketplace.

All loans on the platform are pre-funded by loan originators; investors can start earning from the moment they invest with no cash drag. Moreover, loan originators on the Mintos platform are required to retain a part of each loan on their balance sheet. This means they have “skin in the game” that aligns their interests with those of investors.

With the Mintos marketplace’s current origination volume of EUR 150 million per year, there are always plenty of loans available in which to invest. It is also crucial for us that non-bank lenders on our platform are experienced in underwriting; therefore we do our due diligence vetting potential loan originators before adding them to the marketplace.

How would you describe your typical investor?

About 70% of total investments come from Estonia, Germany, Latvia, and the UK. As more investors learn about Mintos, the balance is increasingly shifting to Western Europe, where saving and investing culture is more developed. Today, the Mintos marketplace connects investors from Western Europe with borrowers in the Eastern part of the continent, facilitating free movement of capital within Europe.

What brought you to the field of p2p lending?

I come from an investment banking background, having worked in the industry for six years before going for an MBA at INSEAD. Financing my MBA was actually my first brush with p2p lending. I borrowed from Prodigy Finance, a platform that provides funding to international postgraduate students attending top-ranked business schools, while also delivering competitive financial returns to institutional and private investors. After graduating from INSEAD, I was eager to prove myself an entrepreneur, and the peer-to-peer industry seemed to be a dynamic place with great potential.

Who are your investors?

Mintos is a venture capital-backed startup – the company closed EUR 2 million seed round from Riga-based venture capital fund Skillion Ventures in February 2016. Mintos’s owners are its co-founders, a venture capital fund, and employees who hold company stock options.

How are your operations regulated?

Mintos is regulated by Latvian legislation. Currently, no specific laws have been introduced regulating peer-to-peer lending, but the Latvian government is working to create a legal framework by the end of 2016. However, Mintos has applied for a license issued by the Financial Conduct Authority of the UK, and expects to obtain it by the end of this year.

Where do you see yourself in five years’ time?

We aim to be a serious player in the European market – one that provides a free movement of capital enabling integrated, open, competitive and efficient financial markets and services that work for the benefit of investors and borrowers.

We ultimately believe that we create favorable conditions for the growth of the whole non-banking sector, thus making funds more accessible to individuals and small- and medium-size businesses.

If you’re interested in joining Mintos, you can do so through our affiliate link here. This allows you to receive 1% of your investment credited to your account. This is paid in 3 installments for the first 90 days. The investment reward will be calculated after 30, 60 and 90 days from the registration date and be based on the average daily balance. Once you are paid after the first 30 days you will only receive an additional credit on increases to your initial investment.

Mintos Review | All You Need To Know

June 24, 2016 by John Carson Leave a Comment

With ROIs topping 12% per annum, it’s tough to beat Mintos right now, which is why this review is a necessary addition to the Peer Social Lending blog. Before we get into the nitty gritty of this Mintos review however, let’s tackle the basics.

Founded in 2015, the eastern European peer-to-peer lending platform has originated close to €40 million and counts +8,000 investors among its ranks. Average net annual return is +12% although myself and Wiseclerk are both making slightly more than that. And so will the equity investors who have funded the Riga-based fintech startup to the tune of $2.2million in venture capital.

As is the case with most peer to peer lending sites, the story of Mintos really begins with the credit crisis of 2008-09, when asset values of eastern European banks slumped by two-thirds. As a result, the banks shut their doors and loans became extremely hard to come by. This left the eastern European market wide open, allowing platforms like Mintos and Bondora to fill the gap left by the banks.

Key to understanding their success is the SEPA region which allows investors from around Europe to fund eastern European borrowers. Because of the Euro, lenders from any of the 35 member states can invest and make high returns. Unsurprisingly, in the face of 0.5%-1.5% interest offered by the banks, many German, French, and Swiss investors are grabbing the high-yield bull by the horns and flocking to the gates of Mintos.

As a result, Mintos.com receives around 210,000 visits a month from yield-hungry, yet safety-conscious investors, spurring on its already encouraging growth. And so far, this story is missing one key component: some loans on the platform are secured by the borrower’s real estate. This aspect has been key to allaying investors fears, who traditionally pursue more conservative investment opportunities, having had their fingers burnt on the stock market since the turn of the century. Be sure to check which loans are backed by real estate as it is stated on those particular loans.

With that under our belt, let’s take a look at the platform feature-by-feature in order to get a good idea of its quality and attractiveness for private investors like you and me.

Let’s get this Mintos Review started with the Loan listings

The loan listings represent the beating heart of any peer-to-peer platform. In Mintos’ case, that heart is beating to the tune of 3854 investment-ready loans listed in the Primary Market. For diversification-addicted lenders like me, this is the ideal scenario. Literally thousands of borrowers ensure that any lender can spread risk and protect his/her portfolio effectively.

You still carry the risk of regional economic turmoil, as all borrowers are either from Latvia, Poland, Lithuania, Estonia or the Czech Republic, but most loans are secured with real estate, so even if eastern Europe should face economic apocalypse, investors money is (relatively) secure.

Additionally, all loans on the platform are provided not by Mintos itself, but by third party loan originators. As a result, certain loan originators can offer a buy-back guarantee, which means that if the loan is delayed for 60 days, the loan originator repurchases the investment for the nominal value of the principal and the accrued till the date of repurchase.
Let’s take a look at the key metrics for investors:

Loan terms between 1 to 120 months
Loan amounts vary between €100 and €250,000
Interest rates typically range between 7% to 14%pa.
Monthly repayments
0% fees for investors on the primary market. 1% fee on any sale on the secondary market.
Minimum investment is €10
AutoInvest Tool is availabe
Open to anyone located in the SEPA region
~12% average ROI (according to website)

This is what the primary market looks like:

The shield visible in some of the “invest” buttons signifies those loans which come with a buy-back guarantee from the loan originator. These are my favourites, providing an excellent risk-to-return ratio, and giving my stressball some much needed alone time.

That being said, my conservative investment strategy coupled with relative newness on the platform, has resulted in this option not having been exercised yet. Wiseclerk on the other hand, who has been investing longer and more seriously, shares:

“Over 70% of my investment is in loans secured by buyback guarantees. So I don’t have to worry much about individual defaults risks of these loans but rather about the operator risk: will the loan provider be able to honor the guarantee? So far it works seamlessly. All covered loans that have gone 60+ days overdue have been reimbursed to me as promised.”

So what does an individual loan listing actually look like? Like this:

As you can see from the screenshot, the borrower, collateral, payment schedule and investment breakdown are readily available at the bottom of the page.

How good is the Mintos’ Secondary Market?

The secondary market forms the backbone of Mintos’ business model so I expected it to come at me all guns blazing. I was not disappointed. Very liquid, easy to use and relatively cheap, the secondary market is one of the best in the business.

Whenever a loan on my books approaches the 30 days overdue mark, I list it. After swallowing the 1% fee and offering a discount of around 3% to 4%, I still receive the outstanding principal plus interest back, which is substantially better than a default.

What about Mintos’ Auto Invest feature?

As the name suggests, Auto Invest automatically implements your preferred investment strategy across the available loan listings. The criteria you are allowed to specify are (click on the image to see its full size):

Interestingly Auto Invest does not invest in loans from the secondary market. This feature may well be added later, as many lenders with a bigger risk-appetite than me, look to scoop up discounted gems.

User experience on Mintos

With the core features out of the way, it is time to dedicate a little bit of space to the excellent usability of the platform. From the outset, Mintos is pleasing to the eye, and boasts a slick interface with unobtrusive load-times.

Once signed-in, the platform is easy to navigate and the F&Qs present answers to most of the questions users may have. On top of that, customer support responds to questions within a day or two, and visitors can leave questions and feedback from the homepage.

All-in-all, the platform is a real joy to invest on.

Mintos Review | Conclusion

Mintos’ is an attractive proposition for lenders located in the SEPA area. The average net annual return is higher than on most competing platforms, and the usability is excellent. The liquidity of the secondary market is encouraging, and the repayment rates are reassuringly high.

The Auto Invest feature works well, and the impressive number of loan listings allows investors to diversify to their hearts content.

Peer to Peer Investment | My Experiences

May 11, 2016 by John Carson Leave a Comment

The world of Marketplace lending seems to have fallen into complete disarray in recent times. Prosper had to lay off 28% of its workforce earlier this month, Lending Club’s CEO resigned, and OnDeck’s performance left many analysts disappointed.

It’s fair to say, that May has been a month to forget for US’ peer-to-peer lending platforms. Across the pond however, European platforms are providing a huge amount of fun for those of us who have taken the plunge with a peer to peer investment.

Today, I want to talk about the three European platforms I have been enjoying the most: Bondora, Bitbond and Mintos. Let’s get cracking!

(ALL images are Media Files. Simply click on them to magnify :))

Bondora | The King of Eastern Europe

My peer to peer investment experience on Bondora has been joyous. Founded in 2009 by the exciting young entrepreneur Pärtal Tomberg, Bondora is quickly establishing itself as a major player in the European Market. The platform boasts a net annualized return on investment of 17.56%, and over €63 million in loan originations. Although 17.56% seems a little high from where I am standing, the excellent Claus Lehmann has seen returns around the 17% mark.

So how do they do it? Well, Bondora seems to have nailed a specific niche: (mainly) Eastern Europe. Only borrowers located in Slovakia, Iceland, Finland - and the notable exception - Spain, can apply for a loan. Restricting their pool of borrowers, seems to have provided them with a great expertise on filtering out the great from the bad. (In fact, only two countries are represented in my portfolio: Estonia and Finland!)

As a result lenders located in the SEPA region can make their peer to peer investment, safe in the knowledge that they will make a return.

Initially, it seems that lenders couldn’t have it any easier on the platform. You simply add funds your Bondora account, set a desired bid size, choose your risk profile and activate your portfolio manager. As you can see from my Screenshot, I have opted for the “Balanced” approach which gives me an expected return of 14.88%. The funds will then automatically disburse into loans which fit your risk profile. Easy.

(By my calculations, I have received slightly higher returns than that. But I will not be sending a letter of complaint ;))

What more is there to know? Although the process of placing a peer to peer investment seems straight forward on the surface, it turns out to be quite a convoluted process if you care to dig deeper. As Lehmann puts it:

“With the introduction of new regulation in Estonia, Bondora now prefunds all loans and also keeps a stake in the loans (‘skin in the game‘). Manual bidding on loans is not as straightforward as previously because now investors can make bids, which are not binding until allocation happens.”

Importantly, this only applies if you do not activate your portfolio manager.

Another important feature for peer to peer investors, is the thriving secondary market Bondora offers.

Here, you can make a particularly cheap peer to peer investment. Subsequently, though the repayment rates are lower and the corresponding risk of default is higher.

Overall, Bondora is going from strength to strength and is providing a huge amount of fun to p2p lenders like me. Long may it continue.

Bitbond | The Future of P2P Lending

I first came across bitcoin peer to peer investing over Stu Lustmann’s excellent p2p lending blog. Specifically, it was his earning report for May which peeked my interest.

Fascinated, I started researching the bitcoin lending space, and decided to invest in Bitbond. By documenting my experiences along the way, I have tried to spark other traditional p2p lenders into giving it a shot.

But before we go into my experience on the platform, let’s take a step back to understand what Bitbond is really about and why I think it’s fascinating.

Founded in Berlin, 2013 by Radoslav Albrecht, the fintech startup has received ~€1 million in VC funding and has been growing at a significant pace for the last year or so. Now counting +30,000 users, the bitcoin lending platform specialises in providing small business loans to borrowers around the world. The international aspect of Bitbond is exciting, and is the reason why bitcoin is used.

By cutting the banks out of the process, lenders can place a peer to peer investment and borrowers can take out a loan regardless of location. The thought of supporting small business owners globally seemed pretty cool to me, so I started investing.

As I suspected, the more personal experience Bitbond offers has proven itself to be massively enjoyable. Currently, I am supporting an eBay powerseller from Portugal, an Indonesian Taxi Driver, and an Entrepreneur located in the Philippines.

On the flipside, the risk investors take on is substantially higher than on the other platforms mentioned here. Borrowers are often still becoming acquainted with bitcoin technology, which can also delay repayments by a couple of days.

Fundamentally though, my portfolio is looking pretty good.

Another important point, is Bitbond’s transparency. All investors are listed on the loan pages (with pseudonyms), and can communicate with the borrowers directly via the comments sections!

Overall, the investing process on Bitbond is more personal but less efficient than on Bondora.

You can however activate the AutoInvest feature, to automate your peer to peer investments, but I have chosen against this to maintain the human aspect of the platform.

Finally, you might be saying: “I don’t have bitcoin and don’t know how to get some, so peer to peer bitcoin lending isn’t for me.” Well, you’re entitled to your opinion, but buying bitcoin on Bitbond is as easy as transferring funds on Bondora. As long as you are in the SEPA region, you will be able to buy bitcoins directly on Bitbond.

For those of you located outside of the EU, use Circle or Coinbase to get your bitcoins at zero exchange costs.

I think bitcoin peer to peer investments will be massive in the future!

Mintos | The Rising Star of European P2P Lending

Significantly younger than both Bondora and Bitbond, Mintos, the Latvian p2p loan marketplace, was founded in 2015. Intriguingly, Mintos harbours some significant differences to other peer to peer investment platforms, because it brings together investors and loan originators! These include Mogo, Capitalia and Debifo among others. From an investors perspective, this makes the process a tad more anonymous but that’s not a KO-criteria for me.

Mintos is probably the least well known platform of all three discussed here. It’s relative obscurity belies its massive size however, with over 4000 loans listed in the primary market and a staggering +11,000 in the Secondary Market. With so many options, what can lenders expect from their peer to peer investment here?

(There are only five listed here because of the filters I have set)

Like Bondora, Mintos specialises in bringing European investors together with Eastern European borrowers. Below you can see their loan originations by country to get a better feel for the platform.

As per the industry standard, the interest rates for borrowers, depend on the quality as well as the purpose of their application. As you can see from the Screenshot below, in May of this year, “Invoice Financing” at 12.48% and a “Mortgage Loan” at 14.44% represent the low and high end of the spectrum in terms of interest rates.

What sets Mintos apart, is the very high level of security offered to Investors. Indeed, most loans on the plattform are either secured - ie. the borrower provides collateral - or come with a buyback option if the borrower is +60 days late on his payments.

As a consequence, the interest rates are lower than on the other platforms, and so is the potential payout to investors. Surprisingly Mintos does not (to the best of my knowledge) provide statistics with regards to the average ROI, but my personal experience has been ~9% pa.

Like this investor however, I think that Mintos could do with increasing the number of short term business loans available on the platform.

Overall though, Mintos is an excellent platform which I will continue to enjoy for some time to come!

Peer to Peer Investment | My Experience

With that under out belt, I hope I could shed some light on a few of the lesser known peer to peer investment platforms in Europe. As a takeaway, I would consider the following categorisation appropriate:

Bondora -> Small/Medium Risk -> Attractive ROI

Bitbond -> Medium/High Risk -> Very Attractive ROI and enjoyable personal touch

Mintos -> None/Small Risk -> Less Attractive ROI (but still ~10%)

Happy hunting 😉

Social Lending in 2016

March 16, 2016 by John Carson Leave a Comment

2015 was the year of peer to peer lending. Prosper, Funding Circle, SoFi and LendUp each raised over $150 million and originations reached new, staggering heights. Prosper originated $3.7 billion in loans, more than doubling their previous year’s originations, and Lending Club is estimated to have originated around $8 billion in loans in 2015. Globally, the origination volume has been doubling annually, and is set to reach a jaw-dropping $290 billion by 2020.

So, with peer to peer lending the hottest thing in fintech right now, let’s take a look at the likely developments, both in europe and across the pond, that will shape 2016.

Social Lending in 2016 - The key factors to consider

Institutional investors will play an even bigger role

When Zopa launched in 2005, the idea was a simple one: the democratisation of finance. Everybody above the age of 18 should be able to receive the funds they need, if a large enough number of lenders could be persuaded to part with their cash.

The reality of this philosophy could be observed in their US counterparts as well, Lending Club and Prosper, where all loans in 2008 were fractional. This meant that individual lenders parted with a little bit of cash and came together to collectively fund bigger loans.

Peer to peer lending has come a long way since then, although not all developments have been for the better. One trend we observed in 2015, and will only grow in 2016, is the increasing number of institutional investors hogging the p2p market.

Around 80% of all loans on Lending Club and Prosper are funded by institutional investors, to the detriment of the ordinary lenders which supplied the bedrock of these platforms in the beginning. What has caused this shift? Well, two factors are primarily responsible:

Social lending has proven itself as a highly profitable enterprise
Yields on money markets continue to be abysmal

Thus, peer to peer lending has come to the attention of fund managers seeking higher yield investments.
As social lending grows further, and credible alternatives remain few and far between, we expect the number of fund and asset managers participating on p2p platforms to increase significantly in 2016.

Regulation will shape the global discourse on social lending in 2016

As in any part of finance, the regulators will have a huge say in the developments of peer to peer lending in 2016.
With the market size constantly growing, however, and the nature of the beast continuously changing, regulations are often proved obsolete shortly after coming into effect.

In the UK, the Financial Conduct Authority has been regulating the domestic industry since 2014. To its credit, the body has gone to great lengths to craft a set of rules and regulations specific to peer to peer lending in the United Kingdom, addressing specific risks faced by the people involved.

In the US however, regulation is far less specific, and is often the result of precedent cast by an overlapping industry. Additionally, and in great contrast to the UK and Europe, the lack of a tailored regulatory corset has stifled the industry in the US, inhibiting growth and innovation. As an example, take peer to business lending in the US. You may have noticed it is almost non-existent, despite being a thriving market across the pond.

This is vexing because, where implemented, P2B provides a crucial financing option for small businesses with nowhere else to turn to grow and maximise their revenue. Unfortunately they so often find it impossible to comply with the muddled legal framework, that they fail to operate on a meaningful scale.

Shifting economic policy will affect p2p lending platforms like never before

On social lending platforms, interest rates are designed to correlate with the risk of default. So, if the risk of default goes up, so do the interest rates. Once the risk of non-repayment goes down, then so do the interest rates. Simple enough.

The Federal Reserve on the other hand, increases or decreases its interest rates in accordance with the general health of the US economy. The economy is strong? Interest rates are kept high. The economy is showing signs of weakness? Interest rates are lowered. This mechanism is basically how economies around the world battle inflation and deflation, keeping prices stable and purchasing power on an even keel.

Thus, with the US economy finally showing signs of strength, the FED raised short term interest rates for the first time in nearly a decade, in December 2015. Macroeconomic policy changes such as this will play a vital role in determining the success or failure of social lending platforms in 2016.

As Lending Club put it:
“…fluctuations in the interest rate environment may discourage investors and borrowers from participating in our marketplace, which may adversely affect our business.”

The ways in which the FED can impact p2p lending is manifold, but two potential developments are most likely:

Fewer borrowers take out loans, as they chose to wait until interest rates settle
Returns on traditional assets will rise and therefore become more appealing to institutional investors, resulting in withdrawals of huge sums of capital

As origination fees are the key source of revenue for peer to peer marketplaces, a decrease in the number of borrowers, or a decline in the number of successfully funded loans, will have a huge impact on the health of social lending platforms in the US.

Thousands of miles away, peer to peer lending will face similar challenges from economic policy in europe in the near future, as the ECB pursues an aggressive fiscal agenda. Pushing its deposit rates further into negative territory and increasing bond purchases will result in an increase in commercial lending from europe’s biggest banks, challenging the arguments for p2p platforms.

One potential benefit for social lending platforms may be, that banks decide to pass on the cost of negative interest rates pushed on them by the ECB. This would result in mass withdrawals and a desire to reinvest or store that money somewhere safe and profitable. Peer to peer lending companies may well provide the perfect alternative.

On the other hand, if borrowing becomes cheaper and more readily accessible from commercial banks, borrowers may well decide to go the traditional route and pursue funding from banks rather than social lending platforms.

Either way, europe is currently sailing into unknown waters and it remains to be seen what the effect of peer to peer lending will be in 2016.

Prosper Review: Guide for Investors and Borrowers

December 28, 2015 by John Carson Leave a Comment

Prosper is one of the largest peer to peer lending platforms in the US. Loans of up to $35,000 are available which can be used for many purposes. Investors are able to achieve good returns which are dependent on the credit grade of the borrower.

They can also diversify their investments across credit grades to achieve a balanced portfolio. In this Prosper review we look at the fundamentals of the company and compare it briefly with similar peer to peer lending platforms Lending Club and Zopa, and with Bitbond, a peer to peer bitcoin lending platform.

Ryan has documented his excellent experiences on the platform already, and I urge you to check it out. Below, you will find an updated Prosper review, giving both borrowers and investors some more insights into the mechanics of p2p marketplaces.

A Brief History

When Prosper was launched in 2006 it was a very different market place than it is today. The first peer-to-peer lending site based in the US, from it modest beginnings it has grown almost exponentially, and in July 2015 it passed the landmark of having originated a total of $4 billion in loans.

Given that in its early days the peer to peer lending model represented relatively unchartered waters, it isn’t surprising that it wasn’t all plain sailing, and that the business did make a few errors on the way.

In the early days Prosper used a kind of Dutch auction system where investors would bid on the interest rates they required to finance loans. These left investors vulnerable to defaults as the tendency was for investors to under-price risk, and many early investors lost money; of course the timing was unfortunate given that this coincided with one of the biggest global economic downturns in history.

Even so, many Prosper reviews in the press were highly critical and the overall effect, was to damage the reputation of peer to peer lending generally.

In 2010 Prosper changed their business model. Rather than the interest rates being determined by lenders and borrowers, the business itself set the interest rates based on their assessment of the credit risk of individual loan applicants.

The credit risk is based on the applicant’s credit rating with the rating agencies along with other financial information and any previous borrowing history on the site. Lenders simply choose whether or not to lend at the stated interest rate after reviewing information on the loan applicant.

Investing in Prosper

According to Prosper’s own review on its website, “Prosper provides investors direct, low cost access to high-yield consumer loans from creditworthy borrowers.” What makes prosper different from conventional investment vehicles is that investors can choose their own projected returns based on the risk that they are willing to accept.

As described below, each borrower is assigned a Prosper credit rating, and this is used to determine the interest rate they will be charged. While a borrower with the highest credit grade will be charged an APR of around 6% to 8.7%, a borrower with an average credit rating will be charged around 13% to 15.8%, and a borrower who is considered to be high risk will be charged up to 36%. Interest rates also depend on the loan term and on whether the borrower has any previous history of Prosper loans.

After allowing for defaults, typical returns on a low risk investment are around 5.5%, on an average risk around 11.1%, and on a high risk 10.8%. As we show below, risks to investors reduce as they spread their investments across multiple loans and credit grades. Typical returns made by such investors are between 10.5% to 12%.

Credit rating of borrowers

All new borrowers on Prosper must have a minimum FICO credit rating of 640. Prosper reviews the credit rating and other financial information for the applicant and then calculates the Prosper Rating. Prosper Ratings are broken down into seven categories, with each category being associated with estimates of default rates which are stated as the annual loss rate for that category.

For instance, a Prosper AA rating, the highest possible, has an estimated annual loss rate (EALR) of 1.99% or lower, while a Prosper HR rating (high risk) has an EALR of 15% or higher. The ratings in between these are A, B, C, D, and E.

Fees

Prosper’s revenue is derived from the transaction fees it charges its borrowers and investors. Borrowers are charged a one-off fee of between 1% and 5% of the value of the loan, and investors are charged a service fee of 1% of annual transactions.

Transparency

Along with similar peer to peer lenders Prosper operates a highly transparent system. Investors have a full view of borrowers’ credit data enabling them to develop their own risk adjusted projected return model.

The data includes items such as the credit score, the Prosper Rating, employment status, homeowner status, loan repayment history, occupation, income, credit card utilisation, and more; Prosper reviews at least sixteen levels of credit data. The status of every loan taken out on the site is available to every investor.

Risk

While good returns are available through Prosper, investing in the platform carries a higher degree or risk than investing in a traditional savings account. While there are likely to be some defaults on loans, these are balanced by the higher returns and with a diversified portfolio overall risks of default can be managed.

The chances of failing to make a positive return decrease with increasing diversity. According to Prosper, investors with 400 notes have just a 1.1% chance of making returns of less than 1.1%. This represents a minimum investment of $10,000.

The other risk is that Prosper enters into bankruptcy. Given its level of capital, it isn’t likely, but it remains a possibility. Should it happen then investors receive a degree of protection. All loans and notes are owned by Prosper Funding LLC; a subsidiary of Prosper Marketplace Inc. Prosper Funding LLC is a legal entity that has been approved by the SEC to continue servicing existing loans should the Prosper platform enter bankruptcy.

In other words, the loans are quite separate from the platform. Prosper Marketplace Inc. owns just the IP and the technology, which in the case of bankruptcy would be sold off; the loans would not be involved. However, it would not be possible to issue any new loans. The protection applies equally to individual and corporate investors.

Alternatives to Prosper

There are now many competitive peer to per lending platforms. The best known in the US is Lending Club which recently became a public owned company following its IPO in December 2014. Loans of up to $35,000 are available with a minimum APR of 5.99%. As with Prosper, to invest and borrow you must be resident in the US.

Funding Circle operates in both the UK and US. Specialising in loans to small businesses, it has facilitated over £1 billion of loans in the UK alone. Loans are available from £5,000 up to £1 million. Typical returns for investors are around 70%. Funding Circle only accepts borrowers that are already established and credit worthy; depending on their credit rating interests rates vary from around 6% to 18%.

Zopa was the first peer to peer lending platform which launched in 2004. It is available to investors and borrowers in the UK. Loans are available from between £1,000 and £25,000 with interest rates starting at just 3.9%. Investors can choose average projected returns of between 3.8% and 5.0% after defaults.

Bitbond is a different kind of peer to peer lending platform in that it deals in bitcoins rather than currencies, however the value of its bitcoin loans and investments are tied to the dollar. The use of bitcoins means that loans are completely independent of banks and are not restricted to specific countries or states. Fees are cheaper than Prosper - lenders pay no fees at all compared to Prosper lender fees of 1%, borrowers pay just 0.5% to 3% compared to the 1.1 to 5% charged by Prosper.

Prosper review conclusion

Peer to peer lending has changed the way in which we are able to borrow money and is providing an exciting new opportunity for investors. In this Prosper review we have glimpsed at the history of the company from its origins to the present time and the advantages that if offers both lenders and borrowers have been highlighted.

There are many alternatives to Prosper; we have mentioned just a few of them, in particular Lending Club which is the other main platform in the US, Funding Circle which operates in both the UK and US, Zopa which is based in the UK, and Bitbond which provides an alternative peer to peer cross-border lending model based on cryptocurrency. This article is for your information only, and should not be considered as investment advice.

Bitcoin Lending Report On Bitbond - December

December 4, 2015 by John Carson Leave a Comment

Welcome to part 4 of our cryptocurrency adventure. This month’s bitcoin lending report should be short and sweet and will cover my new investments, as well as my first returns. If this is your first monthly report, follow the links to find out about my investment strategy on Bitbond and why I am using a bitcoin lending platform to begin with.

Without further ado, let’s have a look at my new investments for December:

Loan Listings	Investments (BTC/USD)
All Time Total =	0.96/377
https://www.bitbond.com/listings/2QFZDR4Y7Z	0.02/7.21
https://www.bitbond.com/listings/2QKTTR4YE9	0.10/36.06
https://www.bitbond.com/listings/2QNGJ04YHQ	0.04/14.42
https://www.bitbond.com/listings/2QQ5WX4YP0	0.02/7.21
https://www.bitbond.com/listings/2PPSB84X1R	0.09/32.45
December Total =	0.27/97.36

The first thing I should comment on, is the sum of bitcoins I have invested in two of these loans. In previous months I have tried to avoid lending more than 0.02 BTC to any single loan, in order to invest in as many projects as possible and subsequently spread risk. This has the advantage of mitigating the harmful effects of any defaulted loans. The two listings mentioned here were very well suited to my investment strategy however, which is why I decided to break with my normal investment pattern. These two borrowers fit perfectly into my strategy for the following reasons:

Both are eBay power sellers. One with over 1k and the other with 4k positive feedback
Both wrote a detailed loan description, explaining that the loan was to be used to grow their eBay business
Both have satisfactory income, meaning that their businesses are already doing well
Both are USD denominated loans

There are plenty of other smaller signals which made me lend to these borrowers, but these 4 points are the ones that swayed me.

With this in mind, here is my up-to-date investment portfolio:

As you can see, my portfolio now includes 16 loans, spread nicely across currencies and medium-to-high risk credit ratings. My expected internal rate of return (IRR) for bitcoin denominated loans is 27.77% while US dollar denominated loans have an expected IRR of just over 19%. I believe that the IRR on Bitbond is calculated independently of probable defaults, so it is fair to assume that a few of these borrowers will fall through, bringing my IRR down in the process. That being said, if I end up making a close-to or above double-digit return I will be very happy.

I should also mention that 4 of these loans are still in funding, meaning that they might fail to receive the 60% necessary for the pay out and fall through. In that case I will receive my bitcoins back and re-invest them on the platform. The 4 bitcoin loans categorised as “current” have been fully funded and 3 of which have begun to repay. Here you can see my dashboard:

The fourth loan is currently in a grace period and I am hopeful that he will repay in the coming days. Looking at the loan, we can see that he otherwise has a solid repayment history, which is why I am confident he will repay in time.

Stupidly, I invested around 0.15 BTC in this bitcoin loan which is way above the threshold I set myself at the beginning. Interestingly, the three borrowers who repaid on time, all have significant eBay accounts connected, whereas the late borrower does not. This is a good portent for the vast majority of my bitcoin investments on Bitbond, as they validate my lending strategy, highlighting the importance of high-quality eBay accounts.

Ending December’s report on a high note, the bitcoin interest I received is significantly more than I could have hoped for when I placed the investment. This is due to the meteoric increase in bitcoin’s price since I placed the bids. Specifically, the value of my bitcoin investments in october, when I placed the bids for which I am now receiving interest, was 0.45 BTC or around $117.90. On the 1st of December, when I received my repayment, the value of 0.45 BTC had grown to $162.26, bringing up the value of my received interest significantly.

Now, I completely understand that the price of bitcoin is volatile and a price crash might see the value of my bitcoin returns come back down, but that is why I have diversified my Bitbond lending portfolio to include a healthy mixture of currencies.

Bitcoin Lending Report - Conclusion

I have to say that in total I am very happy with my experience on Bitbond so far. Receiving my first interest is reassuring and I am now confident that I can make significant earnings if I stick to my investment strategy. Connected and high quality ebay accounts seem to be a good indication of a borrowers ability to repay, as shown by the interest I have received already. Further, I need to remember to keep my investments in individual loans around the 0.02 BTC mark, and only lend more if the borrowers show themselves to be the perfect fit, as two did this month.

Overall, I am excited to see what the future holds for my bitcoin investments. Let me know what your thoughts on bitcoin lending are, and merry Christmas.

Peer to Peer Lending in Europe - The Coming Gold Rush

November 13, 2015 by John Carson Leave a Comment

Peer to Peer Lending In Europe has certainly picked up recently, with a surge in new companies popping up left, right and centre. With this comes competition, changes in interest rates, a variety of opinion over which company is the best to go with.

Many investors in the US are somewhat unaware of the market in Europe, despite some fascinating developments over the pond - the beginnings of a p2p lending gold rush!

Average annual net return on investments

in the US, companies such as Lending Club and Prosper often love to boast and claim to have the most superior return rates for lenders. However, when reviewing statistics across the pond and beyond it is clear to see they might be wrong.

Now, Prosper’s returns range depending on the risk factors of the different investments that they offer, but the lowest risk nets you on average 5.48% and the highest risk option usually returns 8.76%. Lending Club’s average ROI also differs by the grade of investment, but the lowest risk option returns less than Prosper: an average of 5.22% whereas the second highest risk option has been returning an average of 9.5%.

In comparison with European Peer to Peer Lending platforms such as Bondora, the US platforms do not look so high and mighty. Bondora claim to have a staggering average annual return rate of 18.44% which is far higher than the other European Peer to Peer Lending platforms such as AuxMoney which claim a return rate of 6.70% and RateSetter which boast a return rate of 3.7%.

Even still that means AuxMoney and Bondora both offer far better rates than the US companies, while RateSetter still offers a slightly competitive rate - this proves that anyone standing by the US’s unconquerable rates is at the very least, deluded.

So you might be thinking well that does not settle it, what if companies such as Prosper and Lending Club have a larger congregation of customers - having more would mean chance for things to go wrong and average rates to drop. Well, Bondora only have 240,000 customers - now rising very rapidly as you’d expect but Auxmoney and RateSetter both have over a million customers each as does Lending Club.

Now admittedly, Prosper have 2,000,000 customers - that is more than any of the European platforms… However, in March 2013 Bondora averaged a return rate of 17% when they only had 15,000 customers - so the simple correlation argument that more customers will result in lower rates is in fact false. It is the quality of the borrowers, the types of investments the company is making that will provide the best return rates and based on that alone you cannot argue with the fact that Bondora is a more profitable investment than Prosper or Lending Club.

All in all, both Peer to Peer Lending in Europe and in the US have some great average annual return rates to boast about, however Bondora is definitely worth taking a look at if you’re looking for the best rate.

Default Rates

Default rates is definitely something you will want to take a look at when comparing the top peer to peer lending firms, now if you are a P2P investor in the US you have undoubtedly also heard about the minimal default rates Prosper and Lending Club boast about. Prosper do have a very impressive statistic they often wave in people’s faces, their borrowers average credit score is very high, coming in at 700!

Now both Lending Club and Prosper roughly achieve a 5% default rate but believe it or not, Bondora’s low risk option comes with an average default rate of just 1.62% despite the high return rates!

Now again, Bondora seem to be hitting the ball out of the park here but it’s not just them that are winning the default battle for team EU! No, AuxMoney has an average default rate of 3.5%, roughly 1.5% lower than both Prosper and Lending Club while RateSetter came through 2014 with 1.79% and this year so far have an amazing rate of just 0.48%. An incredible statistic for RateSetter to try and maintain.

At this point in my analysis, I have to say the US firms are looking quite feeble standing against the EU firms. Peer to Peer Lending in Europe is taking off, and it’s looking like it’s going to be a safe flight for most! RateSetter doesn’t look so small now either, sure they have a lower average return of income than any of the others firms I have mentioned but if they maintain a default rate of 0.48%, it’s certainly sounds so much more appetizing than fairly average rates and a 5% default rate!

Fees and insurance

Of course it’s definitely worth taking a look at the fees and whether or not the companies offer insurance.

Now this is beginning to form a bit of a trend here, Prosper and Lending Club again advertise the fact that they only take servicing fees of just 1% - and yeah that is low, it sounds fair. Well RateSetter charge no fees to lenders. Bondora charge no fees except just €0.38 on withdrawals from your account. AuxMoney only charge a lender’s fee of 1% of the amount for each bid that is successful.

I find it hard to believe that you have read the last few sections of this article and are not thinking it’s a 3-0 victory to Europe in this Peer to Peer Lending battle.

EU vs US Summary

European firms offer better return rates across the board when taking into account the shocking default rates offered by the US firms, not to mention Bondora’s ROI which blows everything else out of the water and sky high. The only thing left to really consider is fees which of course again, you’d rather not pay a fee so this is a no brainer.

Europe triumphs over US when it comes to Peer to Peer Lending, more and more people are realising this and soon all of the customer’s will be going to the EU - get in now while you can take advantage of rates companies like Bondora are offering rather than wasting your time with Prosper.

Banks beginning to run and hide, popularity on the rise

We can actually already see banks worrying, Metro have been lucky enough to strike a deal with Zopa in an aim to take on the big high street banks (Metro being a fairly new bank). Lots of the big Peer to Peer Lending companies are also investing a lot of their money into expanding their businesses, this can only fill people with more confidence in the new system as quite clearly it is doing well.

What this means is popularity of the Peer to Peer Lending in Europe is about to rise dramatically, along with the new ISA scheme, the market is going to be much much busier - there will be more people hearing of P2P lending that will want to borrow too!

A deep seeded hatred for banks and bankers has been planted for a long time within the UK and other parts of Europe - people are waking up and seeing Peer to Peer Lending as a way to defeat them at last and take what is rightfully theirs.

If you need a quick reminder of why you are better off Peer to Peer Lending in Europe than investing your money into a regular savings account, take a quick gander at this table (courtesy of www.moneysavingexpert.com):

	Easy Access	3-Year Fix	5-Year Fix
Regular Savings	1.61%	2.7%	3.05%
Peer to Peer Lending	3.5%	4.8%	5.9%

The P2P Lending rates shown in the above table have all been taken directly from RateSetter (Bondora would obviously be far higher).

Why is Peer to Peer Lending in Europe the coming gold rush?

As explained throughout this article, P2P Lending in Europe is far superior when stood against high street banks and the US companies. There’s a high chance if you are in the US and a P2P investor you have read this and are now considering jumping over, it’s simply a matter of this information not circulating yet.

More and more people are going to get a whiff of this new area of opportunity, banks are going to begin providing higher return rates to compete so even the ones playing it safe will earn more money through this period.

People looking for loans for small businesses will understand they will have better odds going to a P2P Lending company than a bank and will also more than likely be granted a better rate and anyone looking for a sound investment promising a good return with minimal risk is going to be coming straight to the European firms! Everyone is going to benefit from this situation except the banks and bankers which I’m sure will be ok so do not worry too much about them.

Social Lending for Bad Credit

November 3, 2015 by John Carson Leave a Comment

People with bad credit ratings find it hard to borrow money from conventional lenders such as banks. Subsequently many turn to expensive lenders such as pay day loans companies when they need a loan, generally at extortionate interest rates. However, over recent years social lending or peer to peer lending has developed from a single company founded in 2005 to a worldwide phenomenon.

Some of the advantages of social lending are lower interest rates for borrowers and higher returns for investors than they would obtain through banks. Importantly, to borrow from a social lending platform you don’t need an impeccable credit history.

Here we will focus on social lending for bad credit, looking first at conventional peer-to-peer lending platforms. While these will lend to much riskier borrowers than the banks, they too have limits. These are determined by default rates, bad loans that aren’t repaid on time, which are a measure of the risk to lenders. Such platforms have other constraints too, which we will also look at.

More recently a different kind of social lending platform has emerged. This is based on the cryptocurrency bitcoin. Bitcoin lending and borrowing can happen without the need for a bank, which creates whole new lending opportunities. Bitcoin lending platforms treat credit ratings in an entirely different way and thus offer new opportunities for social lending for bad credit. We will look at how this works.

What is bad credit?

Before we examine social lending for bad credit, we first must define what we mean by bad credit. If you do a personal credit report with a company such as Equifax, you will be provided with a detailed breakdown of your financial history over several years. You will also be given a numerical value on a scale that shows where you stand compared with the rest of the population.

Scores range from 0 through to 600 in the UK; those with scores of 467 and over are considered to have an excellent credit rating and should have no problems borrowing from any bank of financial institution. With that in mind, the average score in the UK is around 390 and although it can be considered risky, people should still be able to borrow money though not at the best available rates.

People with scores below 366 are considered to be high risk, and conventional borrowing is likely to be extremely difficult and if available then only at high interest rates, for instance pay-day loans. Note that the figures here relate to Equifax. Other credit agencies use different scales, for instance Experian and Call Credit scores range from 0 to 999 with any score below 720 considered poor.

In the US Experian scores citizens between 330 and 830. Interestingly, Minnesota has the highest average credit rating, scoring 718 on average. This is in contrast to the southern states which typically score lower on the credit rating scale. The average credit rating the US is 687.

While credit rating is important for people wishing to take out a personal unsecured loan with a bank, many more investors and platforms are willing to provide social lending for bad credit. But that doesn’t mean anybody with bad credit will be successful in obtaining a social loan. Most major peer-to-peer platforms will reject loan applicants with particularly bad credit.

Social lending for bad credit isn’t available on Lending Club for applicants with a credit rating below 660 (Experian) and the minimum credit score on Prosper and Upstart is 640. Some smaller platforms will lend to applicants with lower credit scores, possibly as low as 600, but that almost certainly is the lowest that any conventional platform will consider.

Funding for people with bad credit isn’t just a matter of loan availability. The cost of the loan is an important consideration, and there is huge variability. While typical good credit social lending interest rates are between 5% and 6%, social lending for bad credit rates can be as high as 35%.

Default rates

From an investors point of view, the key metric of concern is the default rate. In general, there is an expectation of direct correlation between default rates and the credit rating policy of the lender. Clearly a lender who is willing to lend to people and businesses with bad credit is likely to experience higher default rates.

When a borrower defaults it is the investor who takes the hit, as the overall returns that can be expected are reduced. So if P2P lenders such as Lending Club and Prosper are willing to accept borrowers with relatively poor credit ratings should investors in these platforms be concerned?

It is instructive to look at the default rate at these platforms and how they have varied over the years. Lending Club’s default rates in its early years from 2007 were quite high, but by 2010 they had come down from a high of 14% to just 2.8%.

In 2012 Lending Club changed its policy regarding credit ratings. It lowered the average credit rating of borrowers and increased to average cost of loans by 2%. This had a small but noticeable impact on defaults. Overall the result was increased average yield for their investors. Since then default rates have continued to fall. In 2013 they were 3.6% and in 2014 they were 2.8%.

Default rates at Prosper haven’t tracked those at Lending Club, primarily because of their different strategies in terms of average credit risk and interest rates in the early days, however, their lending policies are now similar as are their default rates and lender yields.

There is a clear correlation between the default rate on credit cards, the economy and changes in employment levels, and the levels of risk have been modelled extensively. While there isn’t sufficient data to demonstrate the same levels of precision with peer to peer lending platforms, there is every reason to suppose that they are similarly correlated, and that the default rates would tend to increase should the economy take a significant downturn.

However as long as the returns remain attractive, social lending for bad credit continues to offer investors overall value.

Bitcoin lending for bad credit

As already mentioned, bitcoin social lending is a new model of peer-to-peer lending that replaces conventional currency loans with bitcoin loans. Banks are no longer required, and the fees charged are considerably lower. Some bitcoin lending platforms focus on business loans while others are experts in pay day loans.

Bitcoin lending platforms treat credit risk far more flexibly than conventional social lending platforms. As bitcoins can be traded without restriction across international boundaries, loans can be made to a wide range of borrowers including those that live in regions that don’t have the luxury of credit rating agencies.

So how do p2p bitcoin lending companies that operate globally assess the credit rating of borrowers? They will use the credit rating scores when available, but in many cases it isn’t. For borrowers who don’t have a rating, these newcomers to the p2p lending industry build a rating for each applicant based on a range of factors.

Identity and address are established using passport, driving licence, utility and phone bills; employment status and income is verified through payslips or bank statements; and any online activity such as eBay and PayPal that reflects the way they handle finance is examined. Additionally, borrowers are also able to build a higher rating by developing an excellent loan repayment history, just like on Lending Club and Prosper.

Thus bitcoin lending platforms can provide social lending for bad credit and to borrowers who have no official credit history at all, yet at the same time minimise the risk of default. They assign a credit rating to each loan applicant. The ratings range from A to F and the interest rate payable varies from around 8% for an A credit rating through to around 30% for an F rating.

From a borrower’s viewpoint, although the higher interest rates might seem high from a local perspective, often they are considerably lower than those prevailing currently in the region where the borrower lives. In many cases they are the only loans that are available to the borrower. From an investors viewpoint, the interest rates provide excellent returns that mitigate the additional risks.

Finally

If you are an investor seeking an opportunity to lend to a borrower in order to generate a far better return than you could hope to get from a bank or financial institution, then social lending provides exciting opportunities. Social lending platforms such as Lending Club and Prosper would appear to have honed their policies regarding client credit ratings and interest rates in order to offer their investors good returns without the need to expose themselves to undue risk.

Bitcoin social lending for bad credit presents an alternative model, which has risks and opportunities attached. For investors who want to diversify globally, it may well be an interesting alternative. But for those sceptical of the higher risk, it will be worth sticking to the conventional domestic p2 lending platforms.