P2P Lending | A Guide to Understanding Secondary Markets
When you invest on platforms like Mintos you will notice that there are two markets that you can acquire loans from. You may purchase loans from the primary market where loans are issued on a daily basis by different loan originators. Or alternatively, you may look to the secondary market to find loans at either a marked-up price, due to their positive status or a marked-down price. Price fluctuations of loan agreements happen because of either, a loss of interest or an unreliable borrower.
The addition of a secondary market increases the volatility and the liquidity of any peer-to-peer lending platform. The secondary marketplaces exist in peer-to-peer lending platforms so that investors can opt to leave their loan contracts early. The ability to leave a loan early is primarily the reason investors seek out secondary markets, however, the secondary market actually provides multiple facets to a lending platform.
These facets include:
- Purchasing cheap or good value loans to sell higher later
- Purchasing loans mid-contract to avoid a funding phase
- Selling loans with outstanding and late payments
- The ability to fund better investment opportunities elsewhere
We would caution investors that platforms with secondary markets will always have added fees. Ultimately, these are services provided by the platform and will always come at a cost. Depending on the platform, this cost could be rather high, averaging up to 2 percent of the total loan contract. You may find some platforms that bring it down to 1 percent, and if it's not by percentage, there is a fixed sum that one must pay to use the secondary market.
All in all, we would advise considering fees, as they can and often do accumulate, into your investing strategy before choosing any series of loans or P2P lenders to invest with.
Mintos
Mintos is the largest peer-to-peer lending service in Europe by several factors. They host the largest number of loan originators, the highest number of investors and the largest average portfolio size per investor. It's safe to say Mintos is a European favorite. Investing on Mintos requires a 10 EUR minimum and yearly returns range from 8 - 12 percent.
Mintos hosts the most expansive peer-to-peer lending marketplace in Europe, perhaps the world. They offer almost every kind of loan type, at different levels of risk, required capital and location. There are always new loan originators working with Mintos. This P2P lender utilizes a variety of techniques to keep their ecosystem thriving and volatile. Their secondary market is in large part responsible for all of the liquidity on Mintos.
Their marketplace is active with investors selling their loan contracts at marked-up and marked-down prices. Investors who use the secondary market may find it more profitable for their investing strategy. Mintos is open to investors around the world and every investment contract on Mintos is accompanied with a buyback guarantee. Loan originators on Mintos are given ratings on Mintos based on their financial statements, as well as user engagement. The more popular the loan originator, the more loans it will issue on Mintos' Marketplace.
EstateGuru
EstateGuru is one of the biggest peer-to-peer lending services in the world and the biggest real estate loan originator. EstateGuru services almost any kind of real estate related loan all over Europe with an emphasis on Eastern Europe. The minimum deposit is 50 EUR and yearly returns range from 8 - 12 percent.
EstateGuru is very well-known as being a trusted investment service that has never lost their investors' capital. This is done by competently vetting both borrowers and investors. In order to use EstateGuru's auto-investing function there is a minimum investment of 250 EUR. All loans on EstateGuru are backed by a first or second rank mortgage and for the same reasons, EstateGuru has been able to protect all the funds in their accounts.
EstateGuru takes a large market share of the real estate projects that are happening in Europe. They have established themselves as a trusted source of funding for large scale projects as well as smaller scale projects. Investors on EstateGuru can find loans for almost any venture that requires a property. A few examples of the kind of loans EstateGuru would list are for retail businesses, restaurants, hotels, homes and development.
Swaper
Swaper was formed in 2018 by the loan originator Wandoo Finance. Swaper is an easy auto-investing solution whereby investors invest a minimum of 10 EUR. Swaper uses its automatic investing algorithms to ensure that investors will receive a yield of at least 14 percent. If an investor invests over 5000 EUR then the yearly return will increase to 16 percent.
Swaper features an easy to use platform with absolutely no fees other than a 2% trading fee on the secondary market. Because of the ease of use and liquidity of Swaper, it's become a favorite for many peer-to-peer loan traders. Swaper's parent company, Wandoo Finance only issues out loans to Swaper in the form of short term, 30 day, unsecured consumer loans. The loan amounts are humble in sizes and so investors are advised to simply allow Swaper's auto-investing function to do all the work for them.
Due to the automated nature of investing with Swaper many investors find themselves unsatisfied with their current loan or feeling like there could've been a better one. If you're one of these investors, you can go straight to Swaper's secondary market and swap out the loan you didn't like for one you are more confident will perform better.
Market Type
Consumer Loans
Average Returns
9 - 12%
Minimum Investment
EUR 10
Signup Bonus
1%
Registered users
500,000
Total funds invested
EUR 8.9 Billion
Default rate
16%
Regulating entity
Financial & Capital Market Comission (Latvia)
Buyback guarantee
Secondary market
Payment methods
PayPal, Bank Transfer, Credit Card, TransferWise
Withdrawal methods
Wire transfer, Credit Card
Mintos is P2P loan originator aggregator whom after years of slow growth exploded and became the number one P2P lending platform in Europe. Find out why in this review. Is Mintos an investment worth considering?
Market Type
Mortgage Loans
Average Returns
8 - 13%
Minimum Investment
EUR 50
Signup Bonus
0.5%
Registered users
150,000
Total funds invested
EUR 700 Million
Default rate
6%
Regulating entity
Bank of Lithuania
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, SEPA, Credit Card, TransferWise
Withdrawal methods
Bank Transfer, SEPA, Credit Card, TransferWise
EstateGuru is a highly recognized and successful P2P Lending company. What makes EstateGuru as P2P Lender so profitable and secure? Explore the breakdown with P2PIncome's thorough analysis of EstateGuru's strengths and weaknesses.
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
Secondary markets are very important for any investor. The majority of asset classes today are becoming more and more liquid. If any investment vehicle wishes to attract investors for funding they must provide investors the option to take out their money if need be. Locking up your own capital for 3 - 5 years without any option to liquidate can be very unsettling for many, if not all, investors. A secondary market does not necessarily burden any of the involved parties in a P2P ecosystem. It's best to think about it as simply moving the investor's commitment from investor A to investor B. Secondary markets can only aid the lending platform.
In finality, the top platform for secondary markets would be Mintos. The reason being is that Mintos aggregates a whole number of online, accessible, loan originators who already vet their borrowers and investors. Mintos also has an excellent track record for returns ranging from 9 to 12%.
What we look for in a peer-to-peer lending environment, are platforms that can provide users the ability to sell and buy loans in a separate market post purchase. This opens up the ability for some people to implement new investing strategies, it allows investors liquidity and reduces the overall investment risk at no cost of the investment reward. Mintos provides a secondary market to more than a dozen loan originators who would not have a secondary market without Mintos. Their very existence upgrades pre-existing marketplaces by allowing investors to buy and sell loans from a multiplicity of vendors who are already established themselves.