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. There are currently 12 peer-to-peer lending marketplaces reviewed on Alternative investments; choosing between them may be a daunting task.
While my list of favorite platforms will definitively help with this task, this article aims at comparing 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[?]. 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[?]. 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.
With its recently improved website, Fast Invest is now even easier to use. The interest rates on the platforms are great (13% or more), and the buyback guarantee is the best one can find; it indeed triggers after only three days !
The loans on Iuvo offer high interest rates, but they come with a buyback guarantee that only covers the capital. In spite of this restriction, my performance on the platform is slightly better than for most competitors.
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.
While Mintos also offers pre-defined strategies, their returns are likely to be lower than for Mintos competitors.
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 have 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, which makes it an better choice for beginner investors.
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, as well as the availability and conditions of a buyback guarantee.
We’ll then move to features provided by the platform’s website : secondary market, auto-invest feature and platform ergonomics.
In terms of performance, Omaraha is clearly the winner. My portfolio’s XIRR is close to 20%, and one can currently invest in partially secured loans yielding around 27% !
Another platform with high returns is Iuvo; again, the buyback guarantee isn’t as complete as other platforms – it only covers the principal -, but this is more than compensated by the high interest rates.
For totally secured loans (ie a buyback guarantee that covers both capital and interests), Mintos and Viventor both allow to invest in loans yielding 15% (in July 2019); yields at Bondster and Fast Invest are slightly lower at 13% while Robocash and Swaper both offer 12% loans.
Mintos has by far the largest amount of loans. With 60 originators, there’s really something for everyone ! Viventor comes next, with 20 loans originators offering a large variety of loans.
While most marketplaces suffer from a cash drag at some point, the only one where this is a serious concern is Swaper.
The clear winner in that regard is Fast Invest, with an insanely short delay of 3 days.
Other 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, too. In practice, just like Omaraha, the combination of high interest rates and of a low default rate has resulted in a higher performance than for competitors with a standard buyback guarantee.
Of course, for beginner investors, we’d advise to stick to platforms that guarantee both principal and interests.
One of the cleanest auto-invest screens available is found at Fast Invest. Swaper’s auto-invest is also an example of simplicity.
In spite of the large volume of loans available, Viventor also manages to keep the auto-invest screen very user-friendly.
On the other hand, the drawback of Mintos’s very large array of loans is that the auto-invest screen may be intimidating for beginners. Here’s what the part of the screen dedicated to originators look like :
Similarly, Robocash’s lower-quality 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 they nearly all offer this feature.
One notable exceptions is Omaraha, where you’re stuck with your investments until their maturity.
Most platforms offer a secondary market that’s free of charge; however, once more, several variations have to be noted :
- Fast Invest doesn’t provide a secondary market, but you may resell your loan to the platform; however, doing so will forfeit the loans interests – even the ones you already received –
- Robocash only allows to resell long-term loans; however, this restriction isn’t a big deal
- 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, Fast Invest, Viventor and Bondster’s websites are extremely user-friendly and look just great. Using them is a real pleasure !
Choosing the right platform will mostly depend on how familiar you are with peer-to-peer platforms. While beginner investors who want to easiest investing experience possible should look at one-click investment platforms, the ease of use of the three following platforms make them a great choice even for investors with little P2P experience.
Viventor basically checks all the boxes : in terms of performance, liquidity or ergonomics, it’s an excellent platform. Indeed, the large volume of available loans yield high interest rates and come with a buyback guarantee; in addition, the website is very user-friendly.
Bondster is an excellent choice for beginner and advanced investors alike. Through this platform, it’s easy to get returns around 13% without any hassle. I only regret the lack of a secondary market.
Fast Invest is another platform that’s suitable for investors of any level. Its faultless ergonomics and good interest rates make it an excellent choice.
Unlike the previous peer-to-peer lending marketplaces, Mintos is more geared towards intermediate or advanced investors.
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.