Investing in loans : process overview

A five-steps process

We’ll now take a look at what the overall investing process looks like. A more concrete example will soon be available in the form of a step-by-step investment guide.

Investing in loans : process overview
Investing in loans : process overview

Opening an account

First, you need to create an account with the platform. You’ll usually need to provide only basic information about yourself : name, date of birth, address. Several websites ask for a scan of your ID; it will be required anyway once you want to withdraw money so it can be useful to have one at hand anyway.

After validation a confirmation e-mail, your account is immediately ready. The whole registration takes a few minutes at most !

Crowdestor's registration form
Crowdestor’s registration form

In the future, the registration process may require some additional documents, in order for the platforms to comply with the anti-money laundering laws.

Funding your account

Next step is to deposit funds. All websites allow you to do this through a SEPA transfer; other options may be available as well.

If you use an online bank it’s really a matter of seconds : just copy-paste the bank information provided by the website. They usually provide many details, but you’ll probably only need the bank name and IBAN (International Bank Account Number). You may want to save them for later use, in the likely case you want to deposit more funds ! Just be careful to use the right instructions for the transfer (called “Reference text”, “Payment Details” or “Payment purpose”), as they allow the platform to sort out the funds deposited by the different clients.

Deposit instructions at Debitum Network
Deposit instructions at Debitum Network

The funds will usually be available for investing after 2-3 days.

Some platforms allow credit-card deposit but it’s not very common, and I would basically advise against it as it will reduce your credit card’s monthly limits.

Investing in loans

Once the funds are available for investing, it’s finally time to invest in loans matching your investor’s profile !

You can usually choose between manual and automatic investing. Both modes allow you to specify which loans criteria to apply. The most common ones for individual loans are :

  • presence of a buyback guarantee, or credit rating for unsecured loans
  • interest rate
  • country
  • loan duration

When investing manually, filters allow you to display only the matching loans. You’ll then be able to select the ones you want to invest in. Here’s an example of the filter and resulting loans for individual loans:

Filter and matching loans at Viventor
Filter and matching loans at Viventor

For real-estate and business loans, the process is much simpler. The number of loans is much smaller than for P2P lending platforms, so they’re usually all displayed without need for filtering. This screen is usually much more appealing visually than for peer-to-peer loans !

CrowdEstate's list of business loans
CrowdEstate’s list of business loans

Finally, the auto-invest feature we already mention earlier will allow you to input the investing criteria you want, in a way similar to the filtering used when investing manually in individual loans. You’ll also set the maximum loan size and your desired portfolio size; other options will usually control whether the interests get reinvested or not. Once started, the auto-invest will automatically invest your available funds according to your preferences, provided there are matching loans available.

As I already mentioned, I only advocate using this feature on P2P platforms, where the loans are standard. While auto-invest is available on several platforms providing real-estate and business loans, you should examine these investment opportunities carefully before investing !

Watching your account grow

My favorite part 🙂 As the principal and interests are reimbursed by the borrowers, your account will grow. If you’re using auto-invest and chose to reinvest the profits, the system will automatically invest in new loans.

The P2P lending and crowd-lending platforms provide statistics on your account, which help you keep track of your investments and portfolio’s growth.

CrowdEstate's statistics
CrowdEstate’s statistics

Withdrawing funds

If you want to withdraw funds, you’ll usually need to upload a copy of your ID. Withdrawals are in my experience just as quick as incoming transfers. As a safety measure, the withdrawn funds are always sent back to the original account they were transferred from.

Note that withdrawing funds will often require to pause the auto-invest ahead of time, in order to have funds available !

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