Peer-to-peer marketplaces in a nutshell
While 2018 saw marketplaces for real-estate and business loans gain a lot of traction, P2P loans are still the most obvious way to invest in loans. Moreover, as in early 2020 several P2B (peer-to-business) platforms proved to be scams, I expect that many investors will return to less risky, more transparent investments.
There are many peer-to-peer lending platforms reviewed on Alternative investments; choosing between them may be a daunting task. This article aims at comparing many of these platforms in greater detail.
Advantages of individual loans over real-estate and business loans
One main advantage of peer-to-peer loans is their safety : as they’re pretty standard, the risk are easier to evaluate, and 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 individual loans an obvious choice for beginner investors.
Also, liquidating your portfolio is seldom a concern as most platforms offer 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.. It means that in most cases, you’ll be able to resell your loans quickly, should the need arise.
Drawbacks of these investments
The returns for individual loans are usually lower than what you’d get for more speculative real-estate or business investments.
Peer-to-peer marketplaces overview
We’ll compare the following platforms :
Bondster provides short-term and medium-term loans with rates of 13% or higher; all individual loans are covered by a buyback guarantee. In addition to the great interest rates, the strong selling points of this platform are its great ergonomics and neat appearance.
Iuvo‘s main strength is their focus on loan originators’ reliability. While Mintos features more than sixty of them (and Viventor more than thirty), there are only ten at Iuvo, thanks to their very strict onboarding criteria.
All loans on Lendermarket are originated by subsidiaries of the large financial group CreditStar. They also have similar characteristics : 14% interest rate (as of March, 2020) and short-term duration.
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.
Omaraha has by far the worst interface you may ever come across when investing in loans. In addition, the loans supply has greatly decreased in 2018, 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% !
Robocash focuses on payday loans. While the interface isn’t as streamlined as Swaper’s, it’s still a great choice for very short-term investors.
Swaper is a direct competitor to Robocash. Their website is much easier to use, but they often suffer of cash drags which lower the performance.
Viventor is often described as a “Mintos light”, as these two platforms share many characteristics. With high interest rates, more than 20 loans originators available and a strong buyback guarantee, Viventor is indeed a worthy competitor for Mintos; moreover, configuring Viventor’s auto-invest is much easier.
Detailed platforms comparison
Different criteria will be used to compare these marketplaces.
We’ll first examine the loans themselves : their interest rates and the volume of loans provided on the platform, the reliability of the loan originators as well as the availability and conditions of a buyback guarantee.
We’ll then compare the features provided by the platform’s website : secondary market, auto-invest feature and platform ergonomics.
Let’s first check my actual performance (as of August 2020).
In this regard, Omaraha is ahead of the pack. Indeed, my portfolio’s XIRR is slightly above 19%, and one can currently invest in partially secured loans yielding around 26% annually !
Next come several platforms with returns around 11% – 13% : Lendermarket and Mintos (around 13%), followed by Robocash and Swaper (a bit more than 12%), PeerBerry (around 11.5%), and Iuvo (a bit less than 11%). The performance of both Robocash and Swaper portfolios got a nice boost as the interest rates increased to 14% !
My Bondster portfolio has suffered a lot from the Covid-19, and currently has a XIRR slightly below 10%.
Finally, my performance at Viventor used to be very high (around 14%), thanks to the high interests rates on the platform. It has since dropped significantly, but is now below 8%, which is extremely disappointing !
Mintos has by far the largest volume of loans. With 60 originators, there’s really something for everyone ! Viventor comes next, with 20 loans originators offering a large variety of loans.
PeerBerry and Iuvo both offer a smaller loans volume; it’s especially the case at Iuvo, due to their restricted loan originators selection (see below). Finally, Lendermarket’s total loans volume is smaller than at most competitors, but their investors base is also reduced.
While many smaller marketplaces suffered from a cash drag at some point, the only one where this used to be a serious concern is Swaper – and to a lesser extent Robocash, although the addition of loans from Singapore should improve the situation -.
Reliability of loan originators
The amount of information provided by the platforms regarding their loan originators vary somehow; overall, in 2019, there was a noticeable tendency for them to be more transparent and display more documents.
Several platforms started to rate their originators – although the objectivity of these ratings can be questioned -. In addition, the excellent Explore P2P provides independent ratings for Mintos, PeerBerry and Viventor originators.
As Mintos features a very large number of loan originators, it’s not surprising that their quality vary greatly. At least one of them has defaulted, and several proved to be unreliable. It’s also the case for Viventor’s originators, as Aforti is considered as defaulted.
At the other side of the spectrum, Iuvo only features a small number of originators (currently height). 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 !
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.
Robocash’s loan originators are part of the Robocash Group, which is largely profitable. Similarly, loans originators on Swaper is the parent company Wandoo Finance Group; however, their financial reports aren’t publicly available.
Finally, all loans at Lendermarket are originated by subsidiaries of the large CreditStar group, which is regarded as really reliable.
Most platforms offer rather standard buyback conditions; it covers both principal and interests after a delay of one month or two. 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.
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 spite of the large volume of loans available, Viventor also manages to keep the auto-invest screen very user-friendly.
While still usable, Iuvo’s auto-invest is less readable and more complex. It’s also the case at Bondster, because of the large number of available criteria. Similarly, PeerBerry’s auto-invest screen could be improved in terms or readability and usability.
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 :
And that’s just for less than ten originators; the actual screen lists more than sixty !
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.
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
- Robocash only allows to resell long-term loans
- Bondster doesn’t provide a secondary market, and has rather restrictive terms for early exit
- Selling your loans on Iuvo’s secondary market will incur a 1% fee
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.
On the other hand, Lendermarket, Swaper, Viventor and Bondster’s websites are extremely user-friendly and look just great. Using them is a real pleasure !
Although it’s a matter of personal taste, I find PeerBerry’s and Iuvo’s website less appealing visually; however, both are easy to use – which is the most important aspect -.
Finally, although Mintos’ auto-invest screen is very hard to configure, the newly introduced strategies (which replace the very popular Invest & Access) are extremely easy to use for beginner investors.
Choosing the right platforms will mostly depend on two criteria :
- How familiar you are with peer-to-peer platforms. Some platforms are by far more user-friendly than their competitors !
- How conservative your are in term of returns : the safest loans from the very reliable loan originators at Iuvo yield around 8% annually, half of the highest returns at Mintos for loans from much risky originators !
While beginner investors who want to easiest investing experience possible should look at one-click investment platforms, the ease of use of the following platforms make them a great choice even for investors with little P2P experience.
With interest rates increased to 14%, reliable loan originators and a very user-friendly interface, Lendermarket is an excellent choice to invest in short-term loans. The uniform characteristics of the loans (roughly identical duration, interest rates and same parent company for all loan originators) also mean that investors have less decisions to take, which makes this platform very suitable for beginner investors.
Beginner investors will appreciate the ease of use of Swaper‘s website. In addition, the uniform interest rates makes the investing process easier. On the minus side, little information is available regarding the financial solidity of the company.
Next are two platforms which are great for investors who already have some peer-to-peer experience; compared to their competitors, they will also be favored by investors who are ready to sacrifice some profit in order to get an increased safety.
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. On the minus side, the interest rates are currently rather low, as the platform’s loan originators focus only on the safest borrowers.
Investors in search of a very reliable platform should look at Iuvo; indeed, their selection of loan originators means that they’re much less likely to run into financial troubles than many of their competitors. Of course, the downside will be decreased returns compared to more risky loan originators !
The last two platforms of our selection are harder to use (especially Omaraha), potentially more risky (when selecting unreliable Mintos originators), but experienced P2P investors will enjoy the increased returns they provide.
Mintos‘ auto-invest is more geared towards intermediate or advanced investors. Speculative investors will also take advantage of the high-yield loans offering 15% interest rates (as of August 2020)… but they should keep in mind the risks associated with less reliable originators !
Finally, investors who want to squeeze every possible penny out of their loans portfolio may want to spend some time mastering Omaraha. However, I’m unsure whether it’s currently possible to invest large sums through this platform.