P2PIncome| Are High-Yield P2P Lending Platforms Worth the Risk?
Peer-to-Peer lending is a financial investment service provided for everyday people for the purpose of funding and lending capital to everyday people. P2P lending literally means lending money from person to person. Which is only easily and legally possible because of the conditions P2P lending platforms provide.
P2P Lending widens the gap of entry for everyday people to invest and grow their capital. With the right research and choices, P2P lending can be an essential part of a top yielding diversified portfolio.
In this blog we will be covering the platforms that provide the highest percentage based yield. It should be understood beforehand that projected internal rate of revenue (IRR) is based on projects with borrowers who will commit to their loan contracts.
However, in a small but notable amount of cases, the default rate reported on several P2P lending platforms exceeds a third of all loans issued. While a platform may claim to provide a 30% return in loans it may only be telling the truth if the borrower operates in good faith. Unfortunately, this is not guaranteed.
Like any investment potentially made, investors must ask themselves if the risk is worth the payout. Peer-to-Peer lending proves to be a safe investment for low risk investments that come with either buyback guarantees and/or collateral. Quite often, the highest yield platforms come with neither collateral or any form of guarantee.
PeerBerry
PeerBerry was founded in late 2017 and quickly became the lending favorite of many peer-to-peer lending investors. PeerBerry has a very active marketplace with new loans being filled everyday. PeerBerry is a loan originator aggregator, which means they invite loan originators to service loans on PeerBerrys marketplace. Interest rates generally range between 8 and 13 percent. The minimum investment is only 10 EUR.
PeerBerry is available for investors around the globe. The lending platform is a product of the large European lending organization, Aventus Group. Aventus has been profitable in Europe for quite some time. PeerBerry utilizes multiple features that reinforce the security of their peer-to-peer lending ecosystem.
PeerBerry is similar to the popular peer-to-peer lending platform: Mintos, but PeerBerry actually exceeds Mintos in many ways. PeerBerry uses a dual buyback guarantee protocol that ensures both small time investors and loan originators are protected by PeerBerry. Liquidity and ease of capital movement in PeerBerry's marketplace is what allows them to remain profitable and function properly. PeerBerry also has a large variety of loans from different lending industries, mortgage loans, car loans, consumer loans, business loans and so on.
Lastly, one of the things that makes PeerBerry fascinating is that investors only get to invest a fraction of the loans they're funding. PeerBerry only allows investors to invest up to 30% stake in any project. The remainder of the money is funded by Aventus Group. In PeerBerry, everyone wins only if everyone is winning. That's what makes PeerBerry such an enticing platform, PeerBerry strives to ensure that all parties win, nobody is left behind.
ReInvest24
Reinvest24 is not your conventional peer-to-peer lending platform. Not only do they offer above market interest rates of up to 16 percent they are also able to provide well structured security protocols in place of default borrowers. Reinvest24 was founded in 2017, the platform is a real estate equity investment trust. They don't simply sell mortgages to lenders, they sell temporary equity. Reinvest24 stands at the forefront of innovative real estate investing.
The Estonian peer-to-peer lending service is the first of it's kind. Reinvest24 is groundbreaking because it enables a large portion of the population to acquire equity in real estate and very affordable prices. Real estate is an essential part of any good investment portfolio. Real estate hedges against economy markets and provides, consistent, reliable returns whilst preserving value.
Reinvest24's model incorporate micro finance and real estate equity to allow people to become share holders starting at 100 EUR per share. 100 EUR is also the minimum that you would have to invest to start on Reinvest24. All loans have a 1% fee. All loans on Reinvest24's marketplace are real estate loans but they have different conditions. There are rental loans, mortgage loans, bullet loan, bridge loans and so on. There is a large variety of quality loans. Reinvest24 has never lost investors capital and is one of the best platforms in terms of low default rates. We were able to interview Reinvest24's CEO, Tanel Orro and picked his mind for his great insights on the future of alternative finance.
Swaper
Swaper is a P2P lending platform that seeks to make investing as easy as possible. Swaper is owned and serviced by the loan originator, Wandoo Finance. Swaper has an incredibly easy to navigate platform, a minimum entry deposit of 10 EUR and yearly returns range from 14 - 16 percent.
Swaper deals solely with unsecured consumer loans that must be paid back within 30 days. All loans come with a buyback guarantee provided Wandoo Finance. Swaper is a still newer platform compared to the P2P space as a whole. Investors on Swaper can enjoy zero fees using their platform and a secondary market for the purpose of quickly liquidating loans that are no longer desired.
In terms of numbers, growth, and user acquisition, Swaper would indicate high levels of success and future growth. Currently, Swaper has never lost it's investors capital. As a platform and business model, Swaper has the ability to invite multiple loan originators and became a loan originator aggregator. For slightly more serious investors, Swaper offers a 2% bonus in yearly returns for portfolios larger than 5,000 EUR.
EstateGuru
EstateGuru is a very popular peer-to-peer lending platform. EstateGuru gives their investors an annual return of nine to twelve percent at a minimum deposit of 50 EUR per investment. EstateGuru maintains the number one place in Europe in terms of loans funded, active investors and finished projects for crowdfunding based real estate platforms.
In the beginning, EstateGuru only issued loans in the Baltic regions of Europe. As time passed, EstateGuru expanded to issue loans from all over European continent. There is a great range of diversification on EstateGuru, such as:
- Hotels
- Apartments
- Condominiums
- Houses
- Malls
- Offices
Each type of investment investment has different conditions and rules.It is recommended for investors to choose the real estate projects they are most familiar with.
Moving on, Estateguru gives their clients an easy to use website, percentage based bonuses on investing and an intuitive auto-invest feature. Scanning through EstateGuru's catalog is an enjoyable experience and there are many projects with high yields on EstateGuru. EstateGuru has both a secondary market and an auto investing tool but it requires a minimum of 250 EUR in order to use. EstateGuru is well known for being able to protect their investors. Every project on EstateGuru comes with either a first or second rank mortgage to ensure that investors can retrieve their funds in a worst case scenario.
Understanding Risk and Security
Investing into loans that are high in reward will undoubtedly be accompanied with a higher risk. The reason why the interest rates reach up to thirty percent is because there is a much higher chance of borrowers not paying back their loans.
The conditions for a high yielding loan contract are the three following possibilities:
- No Buyback Guarantee
- No Collateral or Security
- The Borrower has a Bad Credit Rating
Buy Back Guarantee
Imagine someone, say a friend, approached you on the street and said hey, "lend me a 1000 dollars, and I'll give you 1300 dollars in one month", and you say "sure". You give him the 1000 dollars and he never contacts you again, and you lose the money forever. This is an example of a loan defaulting without one of the important three possibilities.
Now imagine, if one of your parents, say your mother, came to you and said,"lend a 1000 dollars to your brother and in one month if he doesn't pay you back, I will." This is a buyback guarantee.
Collateral
If we took the same initial example, and our friend came to us to ask about lending a 1000 dollars and this time said, "here is my computer, if i don't pay you back you can have my computer." This is collateral.
Credit Rating
Sometimes people don't have collateral or a wealthy parent willing to cover their financial mismanagement. But they may have an income, or a stable history of paying people back. If your friend over the years has borrowed money and successfully paid it back each time, it's most likely a safe idea to lend him/her the cash.
These scenarios are important to illustrate to our readers what these protections actually mean and why platforms go to the extent they do to check credit ratings, to check the validity of collateral and do their best to implement buybacks within their platform.
Lending Markets and Related Risks
There are several lending markets that are supported by Peer-to-Peer business models. For example, there are business loans, mortgage loans, development loans, consumer loans, student loans and so on. The difference in these loans can be complex, but in general it is in the amount of interest, collateral, capital amount and duration.
The type of loans found on these platforms that produce a return of 30% are generally consumer loans.
Other types of loans may include investments in volatile markets, such as, lending capital to a medical research facility in hopes of passing a vaccine through the FDA or lending money to a litigation, in hopes that the settlement will be in favor of the lawyer arguing against the vaccine company for providing a shoddy vaccine. These borrowers are volatile because their work may produce little to no results. If they fail the money goes with them. Due to this circumstance, the loan is listed at a marked up price.
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
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
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%.
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.
Verdict
High risk borrowers, medical facilities, lawyers—they all need capital to operate. They should not be disregarded. Carefully selected high-yield loans can be an excellent part of an investor's portfolio strategy. A suggestion, when it comes to high risk loans, is to never invest more than 10% of your overall portfolio in loans that offer 20% yield or higher.
P2PIncome's financial experts recommend all of the sites discussed in this article, but if you need to select just one, we advise you go to PeerBerry. The platform is world class and easy-to-use, and users enjoy average yields of 9% to 12%. All investments on PeerBerry are backed by a 100% buy-back guarantee.