How to invest on the best P2P Lending Platforms in 2021

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Reza Machdi-Ghazvini,CAIA
Last updated on 10 September 2021

Erster Platz

1st place

First place is shared by viainvest and Mintos.

Dritter Platz

3rd place

3rd place is shared by Bondora and Swaper.

This is the complete guide to investing in P2P loans in 2021.

If you:

  • want to invest in the best P2P loans,

  • want to learn all the important basics about P2P loans and

  • want to know how P2P loans are regulated and taxed,

then you'll love this new guide.

Let's get started.

Table of contents

P2P platforms in comparison - the review

Chapter 1: P2P lending platforms in comparison

P2P lending: Platforms in comparison - the review

To invest in the best P2P loans, you first need to find the best P2P platforms. With more than 100 P2P platforms in Europe, you can quickly lose the overview.

We have determined the best P2P platforms for you and explain in detail how we came to the result.

The best P2P platforms in Europe are viainvest, Mintos, iuvo, Twino, Fellow Finance and PeerBerry.

Overview P2P platform comparison

Platform

Average return p.a.

Bonus

Minimum investment

Score

viainvest

12%

€15 starting bonus

€10

24

Mintos

12.83%

2% cashback

€10

24

iuvo Group

9.20%

1% cashback

€10

23

Twino

9.00%

€15 starting bonus

€10

23

Fellow Finance

8.00%

-

€25

23

PeerBerry

11.81%

1% cashback

€10

23

Bondora

8.00%

€5 starting bonus

€1

22

Swaper

14.00%

2% cashback

€10

22

Robocash

12.00%

1% cashback

€10

17

Crowdestate

15.37%

-

€100

18

EstateGuru

11.48%

0.5% cashback

€50

16

auxmoney

5.00%

-

€25

13

Lend

5.91%

-

€925

10

Bergfürst

6.00%

-

€10

8

Fixura

3.60%

-

€10

5

How we compared the platforms in detail, we explain in the Bonus chapter: How we compared.

Chapter 2: The best P2P platforms in detail

Now you will get to know the best P2P providers in detail. Among the providers there are sometimes relatively large differences in returns, minimum investment amounts and maturities.

If you want to know more about a platform, you can find a detailed review including experiences on Enqome.

viainvest

viainvest logo

viainvest was founded in Latvia in 2016. The platform itself belongs to the VIA SMS Group, which has been around since 2009. On viainvest, loans are only offered by loan originators that also belong to the VIA SMS Group, which has great advantages for investors.

Conditions

viainvest

Loan types

Consumer loans and business loans

Minimum investment

€10

Average return

12% p.a.

Maturities

Mainly short maturities

Manual and automatic investing

Manual and automatic investing

Collateralization of loans

Consumer loans with buyback guarantees

Fees

Free for investors

Review & experiences

viainvest review and experiences

Mintos

Mintos logo

Mintos is currently (June 2021) the larger European P2P platform. The platform was founded in 2015 and has grown rapidly since then. Mintos offers investors a huge selection of loans that vary by type, country, and currency, among others.

Terms

Mintos

Loan types

Consumer loans, business loans and other loan types

Minimum investment

€10

Average return

10% to 12% p.a.

Terms

1 month up to 60 months

Manual and automatic investing

Manual and automatic investing

Collateralization of loans

Most loans with buyback guarantees

Fees

Free for investors

Review & experiences

Mintos review and experiences

iuvo

iuvo logo

In the beginning, iuvo focused mainly on loans from Bulgaria and Romania. Today, the focus is still on very short-term loans from these countries, which makes iuvo a very interesting platform for investors.

Conditions

iuvo group

Loan types

Consumer loans, business loans and other loan types

Minimum investment

€10

Average return

9.2% p.a.

Terms

1 month up to 60 months

Manual and automatic investing

Manual and automatic investing

Collateralization of loans

Most loans with buyback guarantees

Fees

Free for investors

Review & experiences

iuvo review and experiences

Twino

Twino logo

Twino was founded in 2015 and has since managed to join the top 5 European P2P platforms. The focus on Twino is on short-term consumer loans, mainly from Poland and Russia. The loans offered under the name "Twino Ventures" are business loans.

Conditions

Twino

Loan types

Consumer loans and business loans (ventures)

Minimum investment

€10

Average return

8% to 10% p.a.

Maturities

1 month up to 60 months

Manual and automatic investing

Manual and automatic investing

Collateralization of loans

Consumer loans are secured with buyback or payment guarantees

Fees

Free for investors

Review & experiences

Twino review and experiences

PeerBerry

peerberry logo

PeerBerry was founded by Aventus Group, a loan originator on Mintos. Therefore, a certain similarity to Mintos cannot be denied. What is special about PeerBerry is the group guarantee, which brings investors an additional security in addition to the repurchase guarantees.

Conditions

PeerBerry

Loan types

Consumer loans, business loans and other loan types

Minimum investment

€10

Average return

12% p.a.

Terms

1 month up to 60 months

Manual and automatic investing

Manual and automatic investing

Collateralization of loans

Consumer loans with buyback guarantees and additional group guarantee

Fees

Free for investors

Review & experiences

PeerBerry review and experiences

Bondora

Bondora logo

Bondora is one of the oldest P2P platform in Europe. The platform was founded back in 2009 and, since then, has focused mainly on consumer loans from Estonia, Finland and Spain. Especially beginners appreciate that they can invest in P2P loans easily with Bondora Go & Grow.

Conditions

Bondora

Loan types

Consumer loans

Minimum investment

€1

Average return

6.75% - 12% p.a.

Terms

From 3 months to 60 months

Manual and automatic investing

Automatic investing

Collateralization of loans

No collateral or other guarantees

Fees

Free for investors

Review & experiences

Bondora review and experiences

Swaper

Swaper logo

Swaper was founded in 2016 and has grown steadily since then. An advantage of Swaper is that investors with VIP status can earn an extra 2% return. Swaper's focus is undoubtedly on short-term consumer loans.

Terms

Swaper

Loan types

Consumer loans

Minimum investment

€10

Average return

14% - 16% p.a.

Maturities

30 days

Manual and automatic investing

Manual and automatic investing

Collateralization of the loans

All loans are issued with buyback guarantees

Fees

Free for investors

Review & experiences

Swaper review and experiences

Chapter 3: Basics of P2P lending

Basisc of P2P lending

In this chapter, we'll go over the basics of P2P lending.

We talk about what P2P loans are, how P2P loans work, and what types of P2P loans exist.

What is P2P lending?

What is P2P lending?

In the case of peer-to-peer (user-to-user) lending, a user borrows money from other users. A P2P platform brings these users together.

These users may be private individuals, companies and public institutions. Users can act as investors and also as borrowers.

A particular feature of P2P lending is the fact that there is no middleman who acts as a central point for accepting deposits and granting loans. This role is normally assumed by the banks.

P2P lending is sometimes referred to as social lending or crowd lending.

How does P2P lending work?

Similar to a bank, P2P loans must be evaluated. This is known as a credit check (credit assessment).

This function is fulfilled by the respective platforms. There are differences in how the individual platforms assess the creditworthiness of a loan (or borrower) depending on the individual platform.

The result, however, is that the platforms always assign ratings (scores) for the respective loan. In the US, this score is assessed by 3 credit bureaus (TransUnion, Experian and Equifax) and ranges from 300 to 850.

The better the score, the lower the risk for the investor.

After the rating is assigned, the loan is offered to users on the platform. The interest rate is based on the assigned rating.

The higher the risk, the higher the interest rate.

What types of P2P loans exist?

P2P loan types

It depends on the respective platform why the P2P loans are taken out.

There are platforms that exclusively grant consumer loans from one private individual to another. Other platforms offer their investors a wide range of credit types to invest in.

The most common types of P2P loans include:

  • Consumer credit

  • Car loans

  • Real estate loans

  • Corporate loans

Currently, the majority of the loans offered are consumer loans (as of December 2020).

Chapter 4: Returns and risks of P2P lending

returns and risks of P2P lending and loans

Before you start investing in P2P loans, you should consider the opportunities and risks of P2P loans.

We will show you what returns are realistic with P2P lending and what risks you should consider. Since the platform risk is a specific risk of P2P lending, we conclude the capital with the Grupeer Scam from 2020.

What returns can be achieved with P2P lending?

P2P lending returns

Savers in particular are searching for alternatives on how to invest their money in the current low-interest rate environment.

With a few exceptions, there is no longer any interest on overnight money, and in the case of fixed-term deposits, interest is only available for relatively long terms.

P2P loans with short terms of 3 to 12 months offer investors average returns of over 10% per year.

What risks have to be expected with P2P lending?

There are some risks to consider when investing in P2P loans.

Peer-to-peer loans range from risky to very risky. You are lending to private individuals or companies. This means that you have to expect a total loss, similar to other risky asset classes.

When banks grant loans, they always try to assess the risk of not being able to recover their money. If a loan defaults, the bank is immediately affected. The amount must be written off and reduces the bank's profit.

P2P platforms, on the other hand, merely procure the loans.

The borrower is charged a fee for this service. If a loan defaults, the investors are liable for it.

In addition to the usual risk of loan default, P2P loans require you to consider the other asset class specific risks.

Default risk

Default risk is the main risk when investing in P2P loans.

If the borrower can no longer make his payments, a solution will have to be sought first. If it then becomes apparent that repayment can no longer be expected, the loan is written off.

Foreign currency risk

If you plan to invest in loans in foreign currencies, you must be aware of the foreign exchange risk.

Foreign currencies may appreciate or depreciate significantly. This could severely affect the value of your investments.

Platform risk: Insolvency of the P2P platform

If a P2P platform you invested your money in goes bankrupt, you could face serious consequences.

There is a risk of total loss of your investment in the platform.

In bankruptcy proceedings, the respective creditors, to which you also belong, would have to be satisfied first.

If there are creditors, such as banks, that are satisfied first and then there is nothing left, you will lose any capital you have with the platform.

Counterparty risk: Insolvency of the loan originator (credit initiator)

P2P loan platforms grant loans differently.

Certain platforms provide loans directly from users to other users. Others work in cooperation with so-called loan originators. These are loan intermediaries who refer borrowers to the P2P lending platforms.

For example, Mintos, one of the larger European P2P lending platforms, works with loan originators.

The effects that the bankruptcy of a loan originator can have were demonstrated by Eurocent in 2017 and Aforti Finance in 2019.

If a loan originator goes bankrupt, you are faced with the threat of total loss of your assets through this loan originator.

How safe is P2P lending?

Peer-to-peer loans are risky to very risky investments.

It is also considered to be a very recent asset class.

The historical figures needed to make a reliable risk categorization are simply not available.

Additionally, different types of loans are granted in different countries by the respective platforms. For example, individual platforms grant loans in Indonesia or Vietnam.

The diversity of the platforms makes it very difficult to make general statements about the risk/return profile of these asset classes.

Is there a deposit guarantee for P2P loans?

European deposit insurance requires European banks to protect their customers' deposits with €100,000 per customer.

Since peer-to-peer platforms are not banks, this obligation does not exist.

So, if a P2P platform goes bankrupt, this could have serious consequences for your money. There is a threat of total loss of your capital.

Grupeer Scam in 2020

While most P2P platforms around the world managed to hold their ground during the Corona crisis, a well-known European platform suffered a spectacular failure.

The Grupeer platform had to file for bankruptcy. The platform cited the Corona crisis as the main reason.

Investors are still waiting and fearing for their money.

It can be assumed that they won't get repaid.

At the current time (December 2020), however, it is not clear whether the Corona crisis is the real reason for this development. The wildest rumors are circulating on the Internet, so some also assume that there is fraud (scam).

Chapter 5: Successfully investing in P2P loans

In order to invest successfully in P2P loans, you should follow a few simple rules that we have summarized for you.

To make it as easy as possible for you to get started, we will show you how you could invest €5,000 with an example portfolio.

5 simple rules to invest successfully in P2P loans

  1. P2P loans are a risky asset class. Under no circumstances should you compare P2P loans with savings accounts, call money accounts or other traditional financial products. Since the risks of investing in P2P loans are much higher, you should invest only a percentage of your savings in P2P loans, for example 5% to 10%.

  2. Because of the risks involved in P2P lending, you should never invest your nest eggs in P2P lending.

  3. When investing in P2P loans, you should invest without emotions. It is wise to get into the habit of not getting excited about high returns and not getting angry about loan defaults. Stick to your long-term investment strategy.

  4. You should spread your capital over different P2P platforms. Since individual P2P platforms can go bust, it's important that you don't invest your capital in just one platform because then you could lose all your capital in one fell swoop.

  5. Spread your investments over many P2P loans. Take advantage of the fact that most P2P platforms require low minimum investment amounts of €10 per loan. This allows you to spread an amount of €1,000 over 100 loans.

Example portfolio: Invest €5,000 in P2P loans

Invest €5,000 € in P2P loans - how to

If you want to invest €5,000 in P2P loans, you should spread the amount at least over 5 P2P platforms. It makes sense to concentrate chronologically on the best platforms. Currently, these are viainvest, Mintos, iuvo group, Twino and PeerBerry.

It makes sense to use the automatic investment function on the platforms and not to invest more than the minimum investment amount per loan.

This way you can keep the effort relatively low, and you can spread (diversify) your capital over hundreds of loans.

P2P platform

Investment amount

Investment per loan

Number of loans

average return p.a.

Return per year

viainvest

€1.000

€10

100

12%

€120

Mintos

€1.000

€10

100

12.83%

€128.30

iuvo group

€1.000

€10

100

9.20%

€92

Twino

€1.000

€10

100

9.00%

€90

PeerBerry

€1.000

€10

100

11.81%

€118.10

Total

€5.000

 

500

 

€478.40

Return before taxes

9.56% p.a.

Return after taxes (assuming a 25% withholding tax)

7.17% p.a.

Based on this example, you can see that a significantly higher return can be achieved compared to traditional savings products. But also in comparison to the historical returns of stocks, which are between 5% and 7%, the return is quite good.

Bonus chapter: Regulation and taxation of P2P lending

Let's face it. The topics of regulation and taxation are not particularly exciting. In this chapter, we will show you what you should at least know about P2P lending regulation and taxation.

How are P2P lending platforms regulated?

Regulation of P2P lending

Depending on the country, P2P platforms are regulated a little differently.

In the US, platforms are regulated and supervised by the SEC since 2008.

Within the EU, individual platforms are supervised by national institutions or regulators, each country having their own regulations. To standardize regulation, the European Crowdfunding Service Provider Regime was adopted in October 2020.

How is interest income from P2P loans taxed?

P2P lending taxes

Profits from P2P loans are considered interest income and you must pay taxes on them.

How you are taxed on your profits depends on your place of residence.

Responding to numerous requests, many P2P platforms provide their investors with statements that they can then use for their tax returns.

Bonus chapter: How we compared

There are more than 100 P2P platforms in Europe, focusing on different countries and loan types.

First, we reduced the number of P2P platforms by setting minimum criteria. After that, we scored points for the criteria: professionalism, offering and usability.

Minimum criteria

To reduce the number of P2P platforms, we have set as minimum criteria: the platform must have been on the market for at least 3 years and has granted a loan volume of 100 million euros since its existence.

In our view, only 16 platforms can currently (March 2021) meet these minimum criteria. Actually, the platform ViVentor would also be one of them, but we have excluded it from the comparison because of the current problems on ViVentor.

Points for professionalism (maximum 12 points)

Score for professionalism

When investing in P2P loans, investors must be able to rely on the seriousness and professionalism of a platform.

Regulation: If a platform is supervised and regulated by an official financial market authority, we awarded 5 points. If a regulation (license) has been applied for, we have awarded 3 points. If there is neither regulation nor an application, we awarded 0 points.

Business report: We awarded 4 points if a platform makes its annual report easily accessible to the public, otherwise 0 points.

Statistics: Statistics on the brokered loans provide investors with valuable information about the platform. If a platform offers statistics on the loans on its website, 3 points were awarded, otherwise 0 points.

Points for offering (maximum 12 points)

Score for offering

For a platform to be worthwhile, there must be enough loans available per investor. The P2P loans should offer investors an attractive return, and investing should be free for investors. A low minimum investment (per loan) gives investors the opportunity to spread their investments over many loans. In addition, a secondary market can be very valuable for investors who need to get their money in the short term.

Sufficient loans available: For each platform, we divided the volume of loans brokered by the number of registered investors to determine the volume of loans brokered per investor. We then divided the numbers into quartiles (25%, 50%, 75%, 100%). For example, if a platform belonged to the 25% of platforms with the most loans brokered per investor, we awarded 3 points. In the opposite case, we awarded 0 points.

Yield: We proceeded with this criterion in the same way as with the previous criterion "Sufficient loans available". We divided the average returns of the platforms into quartiles. The platforms that belong to the 25% of platforms that offer the highest average returns to their investors received 3 points. In the opposite case, 0 points were awarded.

Cost: If investing in the main market (primary market) is free for investors, we awarded 2 points, otherwise 0 points.

Minimum investment: we sorted the platforms according to the minimum investment required (per loan). Platforms that were at or below the median received 2 points, otherwise there were 0 points.

Secondary market: if platforms offer a secondary market (or alternative), we awarded 2 points, otherwise 0 points. For platforms that focus virtually exclusively on short-dated loans (minimum share of 75% of all loans brokered), we also awarded 2 points, as a secondary market makes little sense.

Points for usability (maximum 3 points)

Score for usability

Investors want platforms that allow them to easily invest in P2P loans. Lack of functionality annoys investors, leading to frustration. However, because usability ultimately has no direct impact on investment success, we have only given it a slight weighting in the comparison.

Complete digital registration and verification: If investors can register and verify completely digitally on the platform, we awarded 1 point, otherwise 0 points.

Automatic investment function (Auto Invest): If it is possible to invest automatically on the platform, we awarded a 1 point, otherwise 0 points.

Tax certificate: Taxes also play an important role in P2P lending. Platforms that offer investors a tax certificate (or tax report) have received 1 point, otherwise 0 points.

Now it's your turn

We hope you enjoyed this guide and would love to hear from you now.

Have you already invested in P2P loans? What is your experience with P2P lending?

Or maybe you are not convinced about P2P lending?

Let us know and leave us a comment now.