Peer-to-peer loans : the most popular form of crowdlending
When it comes to crowdlending, consumer loans are ubiquitous. Although other loans kinds became available in recent year, consumer loans are still the most common way to invest in loans – and are likely to remain so for a long time -.
In 2019, marketplaces for real-estate and business loans gained a lot of traction. However, in early 2020 several P2B (peer-to-business) platforms proved to be scams. Even investments through non-scam platforms sometimes proved to be a disaster for investors. Indeed, several business loans at CrowdEstate defaulted and incurred large losses, with very little capital recovered.
2021 saw a large growth for another asset class : agricultural loans, mostly through Lande (formerly LendSecured) and HeavyFinance. They offer great opportunity for diversification. Moreover, risks for such loans are usually easier to evaluate than for business loans. Indeed, collateral such as heavy machinery is commonly used to secure the loans.
In spite of their popularity, agricultural loans are still a small niche. Indeed, for most investors, consumer loans remain the go-to financial product when investing in loans, thanks to their simplicity.
There are many peer-to-peer lending platforms reviewed on Alternative investments; choosing between them may be a daunting task. This task became even harder in 2021, thanks to a growing trend for loan originators to leave marketplaces such as Mintos in order to create their own platform.
It was the case for Placet Group (with Moncera) and CreditStar (with Lendermarket) in 2020. StikCredit followed suit in February 2021 with a platform called Afranga, as well as Creamfinance with Esketit.
In this article, we will compare most of these platforms in detail.
Advantages of consumer loans over real-estate, business and agricultural loans
One main advantage of peer-to-peer loans is their safety – at least, when investing in loans from trustworthy originators -. Indeed, as they’re pretty standard, the risk are easier to evaluate than for business loans.
Moreover, they often 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.. It makes peer-to-peer loans an obvious choice for beginner investors.
Also, liquidating a portfolio is seldom a concern as most platforms offer a secondary market . It means that in most cases, investors will be able to resell their loans quickly, should the need arise.
Drawbacks of these investments
The interest rates for individual loans are usually lower than what you’d get for more speculative real-estate or business investments.
Also, as we’ll see, several platforms offer loans coming from dubious originators. Investing in these may result in a large capital loss, in spite of the buyback guarantee. Indeed, as I often point out, this guarantee is only meaningful when coming from a reliable lending company.
Peer-to-peer platforms overview
We’ll compare the following platforms :
Afranga was created by Bulgarian loan originator StikCredit. It offers medium and long-term consumer loans with interesting interest rates – between 12% and 14% as of July 2022 -. In addition to the great interest rates, the strong selling points of this platform are its great ergonomics and neat appearance. Unfortunately, the loan supply isn’t large enough to meet the demand, forcing many investors to buy loans on the secondary market.
I view Esketit as a happy medium between Moncera and Lendermarket. It isn’t as reliable as the former and doesn’t have interest rates as high as the latter; however, the risk/reward ratio is just great. Moreover, unlike Afranga (which is roughly equivalent in terms of reliability and sometimes offers higher interest rates), Esketit offers a loans supply large enough to meet the demand.
All loans on Lendermarket are originated by subsidiaries of the large financial group CreditStar. Interest rates are consistently higher than what their competitors offer – around 15% in July 2022 -. Unfortunately, in spite of absolutely decent financial results, CreditStar suffers of a bad reputation. To make things worse, Lendermarket’s communication and transparency are equally poor.
Mintos is the largest P2P loans marketplace reviewed on Alternative Investments. They feature an unrivaled number of originators, and the loans amount on the platform is unsurpassed. The downside of this very large choice is that configuring auto-invest may be hard for beginners. In addition, many loan originators defaulted – including large ones -, which will lead many investors to lose part of their invested capital. – As Mintos is currently transitioning to a kind of new financial instrument, my current review for this platform isn’t up-to-date yet.
Moncera was created by two former employees of loan originator Placet Group. This financial group is regarded as very reliable; for example, it got the highest ratings at ExploreP2P’s ratings for Mintos originators. The price to pay for this financial solidity is lower interest rates – sometimes single-digit ones – compared to most competitors.
Omaraha has by far the worst interface you’ll ever come across when investing in loans. In addition, the loans supply has greatly decreased, making it hard to increase large sums. So you may wonder, why bother ? The reason is simply the unrivaled performance of the platform; the combination of a partial buyback guarantee and very high interest rates has boosted my XIRR to levels close to 20% !
Although PeerBerry can’t compete with Mintos when it comes to loans volume, this loans marketplace features a large array of loan originators. Most of them are part of Aventus Group, a large and profitable lending group. In addition, the website’s ergonomics has improved a lot and is now on a par with most competitors, if not better. Finally, although several loan originators on the platform are impacted by the war in Ukraine, they strive to reimburse the investors. Indeed, more than one third of the capital has already been reimbursed, which is in all fairness quite impressive.
While Robocash‘s interface isn’t as streamlined as Lendermarket’s or Afranga’s, this platform is still an excellent choice for investors. Indeed, it offers a high level of transparency, and its parent group is very solid – although their profit plummeted in Q1 2022 due to unrests in Kazakhstan and the effect of the sanctions against Russia -.
Swaper is a direct competitor to Robocash or ViaInvest. Their website is very user-friendly and the interest rates are higher than for most competitors. Unfortunately, the platform’s transparency is very low, as very little detail is provided regarding the platform’s loan originator.
ViaInvest follows the same model as Robocash, Moncera or Afranga; that is, the platform and loan originators belong to the same group. In spite of the dated interface and sporadic cash drags, the platform’s reliability makes it a great way to diversify a P2P loan portfolio.
Several platforms previously reviewed on the website were removed from this comparison for various reasons :
- I excluded FinBee as I’m in the process of liquidating this portfolio. Still, I may resume investing there at some point as the concept is interesting.
- I also removed Bondster as all (!) of my funds there are in recovery, so it’s hard for me to give it a fair assessment.
- Viventor is shutting down and investors are likely to take a loss. It’s a unfortunately a striking reminder of what can happen to platforms with sub-standard loan originators.
- Finally, Bondora is also missing as I withdrew all my funds there, due to a very poor performance and concerns regarding the platform’s future. Moreover, I view Bondora Go & Grow as a risky investment and recommend avoiding it.
Finally, I have a small portfolio at Twino and Kviku but never found the time to write the reviews. As both platforms are currently at risk due to the sanctions against Russia, I’m in no rush to do so.
Different criteria will be used to compare these marketplaces.
We’ll first examine the platform’s performance. Then, we’ll tackle the loans themselves, by analyzing the volume of loans provided on the platform. Critical aspects such as the reliability of the loan originators as well as the availability and conditions of a buyback guarantee will also be asserted.
We’ll then compare two useful features commonly provided by platforms website : namely, the secondary market and auto-invest feature. Finally, we’ll finish by examining the platform ergonomics.
Let’s first check the returns I get from the different platforms (as of July 2022). While some portfolios are fairly new (I opened my Esketit account in 2021), some of them date back to 2017, when I started investing in P2P loans !
When it comes to performance, Omaraha is way ahead of the pack. Indeed, in spite of a decrease in 2020 and 2021, my portfolio’s XIRR is still above 18%, and one can currently invest in partially secured loans yielding around 26% annually !
Next comes Lendermarket with returns around 14% returns, which reflects the platform’s higher interest rates.
Afranga, Robocash and Swaper come next, with an XIRR between 12.5% and 13%.
They’re followed by Esketit and Mintos, where my returns usually hover between 12% and 12.5%.
Next comes ViaInvest. In spite of sporadic cash drags, this portfolio still manages to have returns slightly below 12%.
PeerBerry and Moncera come close to the bottom, but still have a double-digit performance. Given the high reliability of Moncera’s originator Placet Group, returns above 10% are excellent.
Finally, my Iuvo portfolio comes last, with returns below 9%.
Mintos has by far the largest volume of loans. Thanks to their 60+ originators, the loans supply is huge.
The volume on most other platforms tend to fluctuate somehow, as do interest rates. As a result, several of them suffered from sporadic cash drags – or at least, there will be times where the only available loans will have low interest rates -.
This especially held true for ViaInvest throughout 2020 and early 2021, where the demand for loans greatly exceeded the supply. Fortunately, the situation has greatly improved and the loans volume is now large enough.
Similarly, Afranga is somehow victim of their own success, and the primary market is often empty.
In addition, Moncera’s popularity sometimes makes it hard to invest in loans with decent interest rates. However, as of July 2022, the supply of loans with double-digit interest rates has noticeably increased.
On the other hand, the last time my Robocash portfolio suffered from cash drags was before 2020. Lendermarket’s loans supply is also plentiful; the same holds true for Esketit, where cash drags are virtually unheard of.
Reliability of the platform and loan originators
The amount of information provided by the platforms regarding their own financials as well as their loan originators vary somehow. However, 2020 and 2021 saw a noticeable trend towards more transparency.
As Mintos features a very large number of loan originators, it’s not surprising that their quality vary greatly. Several of them have defaulted, which will incur losses for investors.
At the other side of the spectrum, Iuvo only features a small number of originators. They’re all profitable companies; moreover, they are required to invest at least 20% (usually 30%) of their own capital in the loans, whereas this amount is usually 5% for most other platforms. This large amount is a strong incentive for them to issue quality loans ! Unfortunately, in spite of this stringent selection, two lending companies present on Iuvo ran into financial troubles and lengthy legal processes are underway to try and recover invested funds.
The reliability of PeerBerry’s originators tend to vary, but most of them are actually part of a large financial group (Aventus Group), which is very profitable. It makes them safer than smaller, independent loan originators. Until now, PeerBerry’s investors didn’t suffer any loss related to the platform’s lending companies. Unfortunately, many loans originators on the platform offered loans from Ukraine or Russia. One could thus fear the worst for the invested funds. However, until now, the lending companies seem to be doing their very best to reimburse the investors, using their own war chest. As a result, close to 43% of the loans from Ukraine and 23% from Russia were already reimbursed.
Moncera’s originator Placet Group is regarded as very solid, which makes Moncera an excellent choice for peer-to-peer loans. Moreover, although the relationship between Moncera and Placet Group were initially loose – Moncera was founded by two ex-employees of Placet Group -, the platform is now part of Placet Group. This makes the platform even more reliable.
Robocash’s loan originators are part of the Robocash Group, which is largely profitable. As Russia invaded Ukraine, though, investors had reasons to worry. Indeed, Robocash Group has a lending activity in Russia and originated there. The situation is fortunately much better than expected. On one hand, the profits for Q1 2022 have shrunk greatly due to the impact of the sanctions against Russia – in addition to the cost of earlier unrests in Kazakhstan -. On the other hand, this lending group remains profitable, and the platform’s activity is located outside Russia. Robocash thus isn’t impacted by the sanctions against this country, or the restrictions on Swift transfers.
Esketit‘s loan originator CreamFinance is considered as solid. They had a loss in 2020, but 2021 ended up with a record profit. The same can’t be said for Jordanian loan originator Money for Finance, which is unprofitable. I thus recommend to avoid investing in their loans, although the interest rate is higher – 14% versus 12% for CreamFinance -.
Swaper follows the same model, as loans originators belong to the parent company Wandoo Finance Group. However, unlike the previous platforms, their financial reports aren’t publicly available.
Finally, Lendermarket is kind of a special case : all loans are originated by subsidiaries of the large CreditStar group. Although CreditStar is profitable according to their audited financial reports, doubts arose regarding the seriousness of the audit. Moreover, the company regularly ends up with a large amount of pending payments towards Mintos investors, which may indicate they have troubles financing their loans book.
Loans on most platforms come with rather standard buyback conditions; it covers both principal and interests after a delay of one or two months. There are two exceptions to this rather uniform behavior :
- Omaraha’s guarantee doesn’t even cover the whole principal; investors will be compensated between 60% and 80% of the remaining principal after a 3 months delay. If this seems very bad, the reasonable default rate for highest-rated loans mean that the poor buyback conditions are more than compensated by the high interest rates.
- Iuvo only guarantees the principal, which means you won’t lose money if the borrower defaults, but in the worst case you won’t make money either.
Please keep in mind that the buyback guarantee is actually offered by the loan originator, not the platform. It may thus be only empty promises if the lending company defaults ! Always invest in loans from reliable loan originators in order to prevent putting your capital in danger.
Several platforms offer very simple auto-invest interfaces. For example, Swaper’s auto-invest screen is a model of simplicity.
Setting up Lendermarket’s auto-invest is also extremely easy, thanks to a well-designed configuration screen.
In the same vein, Afranga’s, Esketit’s and Moncera’s auto-invest are very user-friendly.
While still usable, Iuvo’s auto-invest is less readable and more complex than for most competitors.
The drawback of Mintos’s very large array of loans is that the auto-invest screen may be intimidating for beginners – or even intermediate investors -. Here’s what the part of the screen dedicated to originators looks like :
Another example of a complicated auto-invest screen is Robocash’s. Indeed, the lower quality of the translation makes it harder to configure this handy feature.
Although setting up auto-invest is often easy enough, doing so still may be intimidating – especially for beginner investors -. Three platforms now offer ready-made strategies – which are pre-configured auto-invest, where the only parameter is the portfolio size -.
Although Mintos’ auto-invest screen is very hard to configure, Mintos Strategies (which replace the very popular Invest & Access) are extremely easy to use even for beginner investors. This is unfortunate, as Mintos’ Strategies are a very risky investment. The strategies are supposedly based on their risk level.
However, even the so-called “Conservative” strategy should be avoided, as it’s still likely to include sub-standard lending companies.
In addition to sporting a well-designed auto-invest screen, Esketit also offers strategies. There are three of them, which are differentiated by the proportion of loans from each originator.
Due to the lack of reliability of the Jordanian loan originator, I strongly recommend investors to stick to the CreamFinance strategy.
PeerBerry’s approach is slightly different from Mintos’ or Esketit’s. Indeed, PeerBerry’s plans are differentiated primarily by their asset class. Real-estate loans make up the first kind, while the other category is subdivided in short-term loans (up to three months) and long-term (as much as five years).
Although I don’t like the fact that all loan originators are included, these plans seems to be a decent way to invest. I still recommend a more “hands-on” approach based on a tighter lending companies selection in order to reduce risks, though.
Having the opportunity to resell your loans before term is a standard feature for P2P marketplaces, and many of them offer this feature.
One notable exceptions is Omaraha, where you’re stuck with your investments until their maturity. It’s also the case at PeerBerry and Lendermarket.
Most other platforms offer a secondary market that’s free of charge. However, once more, several variations or restrictions have to be noted :
- After being free for a long time, Mintos secondary market now has a 0.85% fee
- Selling your loans on Iuvo’s secondary market will incur a 1% fee
- Moncera offers to buy back loans directly. After buying a loan, investors benefit from a “cooling-off period” of 14 days, during which it’s possible to resell loans without fee. Later, it’s still possible to resell loans, which incurs a fee of 0.5%. In both cases, accrued interests are lost.
By far the hardest peer-to-peer lending platform to use is Omaraha. It looks ugly, and basically any operation you want to carry will require you to think hard before you figure out how to do it.
Robocash also lags behind other marketplaces in terms of usability, mostly due to a low-rate translation. However, they recently redesigned their homepage and the result is promising. Let’s hope the investors’ cabinet will undergo the same transformation ! Similarly, ViaInvest’s website would require a redesign : it’s hard to read and not user-friendly.
On the other hand, Lendermarket, Swaper, Afranga, Esketit and PeerBerry’s websites are extremely easy to use and look just great. Using them is a real pleasure !
Apart from the auto-invest, Mintos’ website is overall easy to use. However, frequent changes make it more likely for investors to encounter bugs.
Although it’s a matter of personal taste, I find Iuvo’s website less appealing visually; however, it’s still easy to use – which is the most important aspect -.
Choosing the right platforms will mostly depend on two criteria :
- How familiar you are with peer-to-peer platforms. Indeed, some platforms are by far more user-friendly than their competitors !
- How conservative your are in term of risk – and thus, of returns -. Interest rates at Moncera can be as low as 7%, whereas they reach 16% at Lendermarket – not to mention Omaraha’s 26% -. Risk is obviously correlated with the potential returns, so be mindful where you invest your hard-earned money !
Platforms suitable even for beginner peer-to-peer investors
For beginners investors, it’s especially important to focus on reliable loan originators. This precludes them from using Mintos, which features too many poor-quality lending companies. Investing through Lendermarket is also likely to discourage them from investing in loans, as both the platform and their main originator handle investors relationship poorly. Afranga would be a great choice, if it weren’t for the frequent and frustrating cash drags.
All considered, loans from CreamFinance Esketit are an excellent option for newcomers – as well as more experienced investors -. They offer 12% interest rates and are issued by a reliable lending company. In addition, the platform is very user-friendly – not to mention the availability of the CreamFinance strategy, which makes investing a breeze -.
What better choice to invest in consumer loans than a platform owned by Placet Group, one of the most reliable lending groups ? Thanks to the recent interest rates increase, safe investments don’t have to result in a poor performance anymore. As of July 2022, Moncera is again an excellent choice for newcomers and seasoned investors alike.
Platforms which require some experience
These platforms aren’t as easy to use as Esketit and Moncera. As a result, I mostly recommend them to investors who already have some experience with P2P loans and auto-invest configuration. Among them, I basically view Robocash as a must-have, while ViaInvest is a handy complement.
Robocash‘s website could clearly be improved in term of design and ergonomics. However, it’s a solid platform with great returns and a high level of transparency.
Similarly, ViaInvest‘s website badly needs a redesign. In spite of this, the platform’s reliability and actual returns make it a great complement to Moncera and Robocash.
Platform recommended mostly to experienced P2P investors
The last two platforms of our selection are harder to use. In Omaraha’s case, it’s due to the platform’s dated interface – although it was actually recently redesigned -. PeerBerry is a different beast; the website is user-friendly, but it features many different loan originators, which is likely to make investing there harder. In addition, as already pointed out, several lending groups on the platform suffered financially from the war in Ukraine.
The reliability of loan originators from Aventus Group is a huge plus for PeerBerry. In addition, the way they handled the Covid-19 crisis was greatly appreciated by investors. The same can be said for the consequences of the Russian invasion in Ukraine. On the minus side, the large number of loan originators as well as the fluctuations of the interest rates make investing at PeerBerry a hands-on experience.
Finally, investors who want to squeeze every possible penny out of their loans portfolio may want to spend some time mastering Omaraha (but please don’t blame me for losing your sanity as a result of trying to invest there)