My favorite crowdlending platforms – February 2020 update

Changes overview

My previous post about my favorite platforms was published in March 2019. With the downfall of both Envestio and Kuetzal, I couldn’t prevent writing another update.

It pains me a lot that out of eight platforms present in my previous selection, two turned out to be scams. As outlined in my post regarding the consequences of these events, I will from now on focus much more on platforms reliability. This Spring 2020 selection will be much more conservative !

As a result, in addition to Envestio and Kuetzal, I thus removed two additional platforms from this list :

  • Although I still enjoy Ekassa as much as I did, Mintos now provides the same feature with their Invest & Access product. As I’m writing this update, the returns for both offers are roughly similar; in this case, it seems an obvious choice to go for the larger, more established platform.
  • I also removed CrowdEstate because of their poor communication and the way they handle defaults; the contrast with EstateGuru is striking. Moreover, many of their loans are equity-backed, which makes them much less safe than EstateGuru’s property-backed loans.

P2P lending platforms

While these loans usually yield less than business or real-estate loans, they’re generally considered safer and most of them come with a buyback guarantee A buyback guarantee is a guarantee provided by the platform or a loan originator.
If repayment of a loan is delayed by more than a given delay (usually 30 or 60 days),
the platform or loan originator will buy back the loan. The guarantee may cover only
part of the capital, or in a much more interesting case, both the capital and accrued
interests. As the conditions vary from one platform to another, it’s very important
to check this point.
.

Mintos

Mintos is probably the leading P2P platform in Europe, thanks to their large variety of originators providing a huge volume of loans.

This platform has many selling points : the platform is regarded as very reliable, the returns are great – although offered interest rates vary greatly throughout the year -, and the platform is easily usable by beginner investors through Mintos Invest & Access.

On the negative side, the quality of the loan originators A loan originator is the firm that originally provides the loan to the borrower.
They usually lend a small percent of the amount using their own funds, while the
remaining is put on sale on loans marketplaces. The part of the loan kept by the
originator is called called skin in the game; it’s typically 5%-10% of the
loan amount, and is supposed to encourage originators to provide quality loans.
is very heterogeneous : several of them defaulted and many are considered as unreliable. In addition, the auto-invest is very hard to configure compared to most competitors.

Iuvo

As investors are getting concerned about the safety of their investments, Iuvo‘s selection of loan originators is likely to satisfy even the most conservative investors. Indeed, they’re all profitable companies, and the level of skin in the game The skin in the game is the amount of capital invested in a loan by the originator,
using their own funds. It’s usually between 5% and 15% of the loan’s capital. The
goal of this mechanism is to encourage the loan originators to provide quality loans,
as a borrower’s default would mean a financial loss for them.
is much higher than for other loan marketplaces – 30% for most of them, compared to the usual 5% – 15% range -.

Of course, this increased safety will lead to decreased returns compared to more risky originators; as of February 2020, nearly all Euro loans on Iuvo have interest rates under 10%.

Real-estate and business crowdfunding platforms

These projects usually involve much larger amounts than P2P loans, and the loans duration is usually longer.

After the Kuetzal and Envestio events, many P2B (peer-to-business) platforms are regarded with suspicion – I’ve myself put several of them in my blacklist -.

However, several platforms are still worth investing in. I’ve sorted them by what I perceive as the increased level of risk – mostly based on their track record and interest rates -.

EstateGuru

As time goes by, I grow to appreciate EstateGuru more and more. Indeed, although there’s no buyback guarantee, this platform has built a very strong track record in term of default recoveries. Similarly, their transparency level is very high. In addition, all their loans are property-backed; they’re usually safer than many of CrowdEstate‘s equity-backed loans.

Of course, just like for Iuvo, this increased safety will mean that the portfolio’s performance will be lower than for more risky competitors – around 10% – 11% annually -.

Grupeer

In spite of a relative lack of transparency and a dated interface, I still appreciate Grupeer a lot.

What do I mean by lack of transparency ? First, it’s not clear who’s behind the platform, and the financial statements aren’t available. Then, little detail is available regarding loan originators; it’s impossible to assess whether they’re financially healthy without checking outside sources. The platform has pledged to improve its transparency in 2020, we’ll see about it !

To continue on the minus side, there’s still no secondary market to sell your loans before the investment term. Developing it seems to take forever, but it’s finally expected for 2020.

Finally, the website hasn’t changed much since its inception, and it really lags behind most competitors in terms of usability. Reporting is also very basic.

When it comes to the positive aspects of Grupeer, performance comes to mind first. Indeed, the XIRR of my Grupeer portfolio is still above 14% as of February 2020. As this includes my past performance (when loans with highest returns yielded 14% or more instead of 13%), a newly funded portfolio should return slightly less; it would still be a great result ! The buyback guarantee is also a strong selling point.

The platform’s track record is also excellent, with no late or defaulted loans – which is actually a bit surprising given the returns -.

Crowdestor

While the suspicions regarding many P2B platforms grew in early 2020, Crowdestor is still regarded as a trustworthy platform, although the level of transparency regarding the financed projects could be improved.

Crowdestor has many positive aspects, starting with a large supply of diversified loans, and an excellent performance. The platform also provides a buyback fund, which will be used to cover defaults.

Regarding the drawbacks of this platform, there are some concerns regarding future performance. Indeed, until now there’s been no default or serious delay in reimbursements but it’s unlikely that this excellent track record will continue for long. Moreover, the amount financed for several loans was much larger than the buyback fund; should the borrower default, the fund likely won’t be enough to reimburse all of the capital. The lack of information regarding borrowers of several projects was also criticized. Finally, there’s no secondary market so investors are stuck with their investments for a long period of time.

Just like Grupeer, the Crowdestor team has announced an increased focus on transparency in 2020. If they’re true to their word, it’s likely that they will stay among my favorite platforms !

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