P2P Income | Platforms For Risk-Averse Investors
Investing in peer-to-peer lending is about lending your capital to your 'average joe' or neighbor so that they can accomplish their own finance related goals. Make no mistake, lending your money to friends or acquaintances can be a high risk endeavor. The chances that a borrower will simply default on their own is high enough to scare away any investor. This is where peer-to-peer lending levels the playing field. This is done by the clever use of microfinance and proper management of lender/borrower ecosystems.
Prior to peer-to-peer, banks owned a monopoly on lending money and issuing credit. The new fintech companies that are popping up are aiming to solve the centralization issue on credit. P2P enables every day individuals to have affordable access to credit that is not determined by the bank. Rather, it is determined by their peers.
Though, all things considered, peer-to-peer lending does have its own risks. In this guide, we have reviewed some of the platforms that have taken extensive measures to reduce the overall risk of investing on their platforms. These platforms come from different industries such as business lending, consumer lending and mortgage lending. Each of which come with their own unique approach to risk and reward.
ReInvest24
Reinvest24 is a new style of peer-to-peer lending investing where investors purchase temporary real estate equity in exchange for capital. Reinvset24, decided that instead of giving investors a loan contract backed by mortgage they would give them actual equity of the property. All loans come with a business plan for the property, as well as a moment in time where the property will be sold and profit will be made. The minimum investment on Reinvest24 is a 100 EUR and yearly returns range from 11 - 15 percent, which is considerably high for being a very low-risk platform.
The business plan and execution of the given property is very important to both Reinvest24 and the investor. Firstly, the investor receives rental dividends until the loan is completely paid off. For example, if you deposit a 100 EUR and purchase a property share you will mostly likely receive a 5 - 7 percent internal rate of revenue. But more importantly, there are two forms of gains, Reinvest24's team will try to sell the property that you purchased shares of. The property sale will reflect the property gains and provide additional gains of another 5 - 7 percent in your portfolio. Investors can expect a slight cash drag on Reinvest24, which is similar to most property based peer-to-peer lending platforms.
Reinvest24, has reported a zero percent default rate. Reinvest24 is a small operation with just a handful of people based in Estonia. Their team discovers high value projects at good prices and help implement a business strategy for them before listing them in their marketplace. Reinvest24 has a secondary market for investors to cash out for the sake of liquidity. Though Reinvest24 is new to the game, we have high hopes for their ability to manage a lender/borrower ecosystem.
October
October is a French peer-to-peer lending platform for businesses in Europe. October brings together every day retail investors and small to medium sized enterprises (SME's) around Europe to fund business loans. October is a very well-known platform with a very reputable track record. They have never lost any capital for their investors and have executed every fund recovery successfully.
It's important to note, October's platform does not provide an auto-investing tool or a secondary market. October invests a large amount of resources into risk management and protocols for debt recovery. The platform's legal team operates closely with large European institutions like the European Union as well as the Central European bank. October's dream is to "democratize finance". By this, they mean to give an additional line of credit to individuals who could not easily get credit from the bank. This practice allows people to choose which businesses they would wish to fund rather than the give all the processing power of loans to the bank. Octobers platform requires a 20 EUR minimum entry investment and returns range from 3 - 7 percent in yearly returns.
There is only a small number of peer-to-peer lending platforms that actually have a zero percent default rate. October being one of them, is a testament to their competency as a lending platform. All investors on October are given a 20 EUR bonus to fund loans on October. Investors can expect to pay zero fees on October's platform. The low fees, as well as the generous bonus provided by October makes the platform an ideal candidate for beginner investors. The reason why October's interest rates are so low, why there is neither a secondary market nor an auto-invest tool is because the platform ensures investors that the loan contracts on their platform are of quality and profitability.
PeerBerry
PeerBerry is also known as one of the fastest growing peer-to-peer lending platforms in Europe. This is due to the multiple strengths that the platform possesses. To illustrate further, PeerBerry is a state of the art platform with a very sophisticated auto-investing tool. PeerBerry also boasts returns that range from 9 - 12 percent, while also maintaining a default rate of zero percent. PeerBerry is slightly newer than October and therefore has had less years to make errors.
PeerBerry is a by-product of a very well established lending group in Europe called Aventus Group. Initially, Aventus hosted their loans on Mintos' platform until they realized that they did not need Mintos in order to issue their loans to retail investors. To invest on PeerBerry there is a 10 EUR minimum investment and yearly returns range from 9 - 12 percent. Furthermore, the nature of PeerBerry's lending market is slightly different from the rest of the peer-to-peer industry. On PeerBerry, investors are not funding the majority of the loans. What is actually happening is loan originators issue loans to borrowers and then offer a small percentage of those loans onto PeerBerry's marketplace. In total, investors are probably only funding between 20 - 40 percent of the marketplace, if not, less.Otherwise, the rest of the ecosystem is managed by PeerBerry and the loan originators on their site. PeerBerry does not have a secondary market, but investors who are in need of high liquidity can opt to invest in PeerBerry's short term loans. Though, all of this is hardly what is impressive about PeerBerry. PeerBerry really shines in it's dual buyback guarantee, which is in effect, a security protocol which ensures that any defaulted borrower or loan originator on their platform is completely protected by the agreements set forth by PeerBerry.
Swaper
Swaper is an Estonian peer-to-peer lending platform established in Estonia, and formed by loan originator Wandoo Finance. Swaper was created with the mission of becoming an easy auto-investing solution for investors who need their portfolios to grow at minimum effort possible. Swaper is a completely automated service for investors to earn a standard of 14 percent yearly. There is a 10 EUR minimum to invest on Swaper and returns are roughly 14 percent. Investors with portfolios over 5000 EUR receive 16 percent yearly.
Swaper's primary market does not offer investors to manually select their loans. However, investors do have the option of buying and selling their loan contracts on Swaper's secondary market. Loans on the secondary market can be sold either marked or marked down. Swaper has zero fees on their platform aside from a 2 percent transaction fee on their secondary market. Otherwise, Swaper issues short term consumer loans that last 30 days and never exceed a few thousand EUR.
Swaper receives loans from only one loan originator, Wandoo Finance. There is reason to believe that the platform may invite other loan originators to partake in their lender/borrower ecosystem.
Swaper is only serviced by one loan originator. In theory, their platform and business model is operated to host more than one loan originator. Swaper is heavily dependent on Wandoo Finance in order to operate. This is what we consider their biggest downside. Otherwise, Swaper's remarkable track record of never losing its investors investment give Swaper a position among the lowest risk platforms in peer-to-peer lending.
High Risk v. Low Risk
All investments come with a level of risk that is inversely related to the level of reward. The platforms in this guide will never yield above 20% or 30%, and there are no shortage of high yielding platforms in peer-to-peer lending. We personally believe that platforms like October or Peerberry will be preferable to the majority of investors. We often advise our readers that the investments that last the longest will yield the best results because of compounding interest.
We would also suggest to find out which type of loans you feel most comfortable with issuing. To simplify, there are property loans, business loans and consumer loans. These are the three biggest branches of peer-to-peer lending, and within these categories there are subcategories. These loans by themselves are not necessarily high or low risk. However, understanding the kind of loans you are funding will help reduce overall risk for you as an investor.
| Property Loans | Personal Loans | Business Loans |
| Mortgage Loans | Wedding Loans | Invoice Loans |
| Development Loans | Car Loans | Production Loans |
| Rental Loans | Debt Consolidation | Liquidity Loans |
Market Type
Mortgage Loans
Average Returns
12 - 17%
Minimum Investment
EUR 100
Signup Bonus
EUR 10
Registered users
25,000
Total funds invested
EUR 40 Million
Default rate
0%
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, Bank Card, TransferWise
Withdrawal methods
Bank Transfer, Bank Card, TransferWise
Reinvest24 is an equity backed real estate rental P2P lender. Though they are a much smaller P2P lending platform in comparison to the top P2P lenders. They deserve a high place on the list because of their attention to detail and successful execution of business goals.
Market Type
Business Loans
Average Returns
3 - 7%
Minimum Investment
EUR 20
Signup Bonus
EUR 20
Registered users
43,000
Total funds invested
EUR 1 Billion
Default rate
3%
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Card, Bank Transfer, TransferWise
Withdrawal methods
Bank Card, Bank Transfer, TransferWise
October specializes in small risk business loans specifically to SME's in Europe. October has a great track record of fund recoveries, a solid mission and a very strong foundation. October's business and risk strategy is worth the time to read.
Market Type
Consumer Loans
Average Returns
9 - 12%
Minimum Investment
EUR 10
Signup Bonus
0.5%
Registered users
70,000
Total funds invested
EUR 1.8 Billion
Default rate
7%
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, Bank Card, TransferWise
Withdrawal methods
Bank Transfer, Bank Card, TransferWise
PeerBerry is an excellent P2P platform to its 100 percent successful fund recovery track record. They offer slightly below market interest rates in exchange for a guarantee users will never lose their funds.
Market Type
Consumer Loans
Average Returns
14 - 16%
Minimum Investment
EUR 10
Signup Bonus
None
Registered users
6000
Total funds invested
EUR 400 Million
Default rate
Undisclosed
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Transfer
Withdrawal methods
Bank Transfer
Swaper only offers auto investing in unsecured consumer loans in Poland and Spain. Swaper is a subsidiary of Wandoo Finance Group, a loan originator that also services the loans on Swaper's platform. Swaper advertises a 14% IRR and premium investors who have invested over 5000 EUR receive an IRR of 16%.
Verdict
Reinvest24's business model provides investors the kind of yields and guarantees they need. Reinvest24 holds first rank mortgages and gives investors equity of their projects to ensure they are maximizing profit and minimizing liability.
By and large, real estate loans are the safest investment because there is always a property that is backing the value of the loan. As opposed to business loans or consumer loans where the value is slightly more arbitrary. Reinvest24 is a fairly new platform but in the first year of operations they proved to be profitable and have been flourishing ever since.