Two very convenient features
After making up your mind about your investor’s profile, you now have a better idea of the kind of loans you want to invest in. Let’s introduce two useful features the crowd-lending and P2P lending platforms may provide you with.
Auto-invest
At first, it seems convenient to manage your investments manually. As your starting portfolio will probably be small, manually picking up loans matching your preferences won’t be time consuming.
However, as your portfolio grows, it may get harder and harder to work this way. Investing €1000 in small loans (for diversification’s sake) of €10 will start being painful. That’s when auto-invest comes to the rescue.
At the same time, I strongly advise you to check the result of your investment choices regularly. You will also have to update the auto-invest terms when new originators are added, for example. Interests rate also evolve regularly, requiring small tweaks to your auto-invest settings if you want to get the best returns.
One special case is real-estate crowd-lending. Indeed, these investment opportunities often have particular structures; they’re much less standard than P2P loans for individuals. As a result, manual investing will often be your only choice, and they may require more time to study the investment deals.
Here’s an example of auto-invest setup screen in its simplest form, from a real-estate platform.
Also, here’s a slightly more complex example for P2P loans auto-invest.
Secondary market
This aspect is related to the investment duration. You may be okay with having your funds locked for 1 or 3 months, but what about longer periods ? You may find yourself in dire need of these funds. Some P2P lending companies offer a secondary market [?] option, allowing you to put your investments for sale. You’ll of course have to sell them for a discount, and sometimes pay a small fee, so it should be viewed at a last resort measure !
Several platforms – mostly real-estate and business loans marketplaces – don’t feature a secondary market, but offer an early exit option instead. It means that loans can be resold to the platform, for a fee. Unlike secondary market which is often free or very cheap (1% of the amount), the fee for using this service may be very high – up to 5% of the amount -.
Now that we’ve introduced most aspects of crow-lending, let’s have a look at how the investing process actually works !