Getting started

How much money do I need to start investing ?

The minimum amount varies from platform to platform, and also depends on the loan kind.

For personal loans, the minimal amount per loan is usually around €10. However, in order to have some diversification in your portfolio, a more realistic amount would be €200 (that is, 20 loans).

Business and real-estate loans usually have a higher minimal amount, often €50; this obviously makes it harder to diversify a small loans portfolio.

What kind of returns can I expect ?

This will obviously depend on how much risk you’re willing to take. Conservative real-estate loans at EstateGuru yield around 11% annually, while Crowdestor‘s most speculative loans yield more than 20% annually. Returns for individual loans are lower, usually ranging from 10% to 15% annually.

Who can invest ?

While it varies from one platform to another, most of them accept people above 18 from the whole European union.

What financial knowledge is necessary ?

One great advantage of investing in loans instead of equities or even mutual funds is that no financial knowledge is required. Individual loans with a buyback guarantee [?] can all be summed up by three basic parameters about the loan : its amount, duration and interest rate.

How do I open an account ?

Opening an account is usually extremely straightforward. Investors need to provide basic information about themselves, and usually upload a copy of some ID in order to comply with KYC (Know Your Customer) regulations. The registration itself usually takes two minutes or less, while the documents checking may require up to two business days.

Investing process

How time-consuming is it ?

It mostly depends on the kind of loans you’re investing to. Using auto-invest Auto-invest is a tool provided by most platforms; it allows investors to define the characteristics of the loans they wants to invest in, and let the system choose the individual loans based on these criteria. The benefits of using auto-invest is a gain of time, and a larger diversification of the portfolio. on a peer-to-peer platform basically means that all you have to do is watch your account grow. On the other hand, investing manually on real-estate or business loans may require a few minutes to read about the project each time a new opportunity comes.

Overall it’s safe to say that even with a large portfolio, you’ll probably spend less than one hour each week managing your loans.

What if I need my money back ?

Some platforms provide a secondary market The secondary market is a marketplace allowing investors to sell loans from their portfolio to other investors. This is useful if they need to get their money back before the loan’s maturity. which allows investors to sell their loans to other investors. However, not all platforms provide this feature; even if it’s offered, you’ll probably have to sell your loans at a discounted price, lowering your overall profits.

For real-estate and business loans, this feature is seldom available.

Bottom line : please, don’t invest money you may need.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.