It is no secret that P2P lending can generate a +10% profit on most platforms. Since 2018 I have been earning about 12% interest on year-to-year in interest by the use of P2P lending platforms. By using platforms such as Mintos, Swaper, LenderMarket, and EstateGuru there are plenty of +12% interest rates to collect. However, with the risks of defaults, late payments, bad projects, prematurely paid off loans and more, it is not always easy to maintain a good profit.
Using P2P lending can easily generate a 12% profit per year if you know how to invest properly. Furthermore, it is a very stable investment, which compared to stocks and real estate doesn’t fluctuate in price. Additionally, it pays a continuous interest, which can be reinvested immediately to take advantage of the compounding interest effect. I managed to get an annual return of 12,6%.
There are multiple reasons to invest in P2P lending. However, there are also multiple risks to stay away from P2P lending. While there are both pros and cons from P2P lending it is an interesting investment opportunity, which I personally take advantage of and properly will for years to come.
Earnings From 1 Year Invested in P2P Lending
P2P lending is currently a lucrative way of collecting some passive income. You know that feeling you get when you receive dividends from stocks? Well… Imagine that you get a daily or weekly statement with dividends. Wouldnt that be amazing? It is with P2P lending. Currently, I receive daily emails from Mintos and Grupeer and weekly emails from Swaper and a monthly mail from BitOfProperty with the interest I have earned in the period.
In 2019 the interest rate was 12,6%. I made a total of €1.659,4 in deposits, with a principal (amount invested before 2019) of €1.734,93. In other words, I grew my P2P lending portfolio with 111% in deposits. In addition, my interest returns increased from €26,07 to €834,83. The interest earned is not that interesting as I entered P2P lending in September of 2018, and have been invested in the whole 2019, hence the big difference in earned interest.
In the graph shown above is my P2P lending portfolio and interest earned for 2019 illustrated. The grey pillars are the monthly earned interest and the blue line is the portfolio value. The clear takeaway from the graph is that when I deposit more funds, I also earn more interest.
Overall, the interest earned is a reflection of the size of the portfolio. The interest rate of 12,6% did not beat the stock market. The S&P500 returned 29% in 2019. However, the average return on the stock market is 9,8%, and since the loans do not change the value like the stocks, I will calculate on beating the stock market on average with about 2% per year.
“Financial Statement” of P2P Lending Year-on-Year
The financial statement covers the portfolio size at the end of the year and the interest earned is based on the end of the year. The portfolio size is including the interest earned.
The total profit for 2019 was €834,83 with a portfolio size of €3.667,53. Throughout 2019 I added 2 additional platforms to my portfolio. I will try to continue the additional diversification across platforms in 2020.
|Financial Year (in Euro)||2019||2018|
|– Portfolio Size||1229,96||570,14|
|– Interest Earned||109,05||10,07|
|– Portfolio Size||1313||673,72|
|– Interest Earned||173,91||0|
|– Portfolio Size||479,16||422,5|
|– Interest Earned||56,66||14,34|
|– Portfolio Size||416,9||0|
|– Interest Earned||16,9||0|
|– Portfolio Size||75,89||68,57|
|– Interest Earned||7,32||1,66|
|– Portfolio Size||152,42||0|
|– Interest Earned||2,42||0|
|Total Portfolio Size||3667,53||1734,93|
|Total Interest Earned||834,83||26,07|
While I am aware that Envestio has turned out to be a scam (not yet proven by authorities), however, I included Envestio as this was what happened in 2019. In my (future) 2020 report, it will be excluded and counted as a loss. Sadly, I have lost over a third of my portfolio. Furthermore, it was the highest yielding platform in my portfolio.
P2P Lending Experience
The experience with P2P lending is so far great. The platforms Mintos, Grupeer, Swaper, BitOfProperty and FastInvest have all been great. However, Envestio has disappeared into nowhere. This means I have lost €1.313. Needless to say, I will not withdraw from the P2P lending investments. However, I will be looking thoroughly at the platforms forwardly when assessing platforms to invest with.
Through 2019 my interest return was 12,6% as previously stated. Each platform brings different returns and some are fluctuating more than others.
Mintos return 2019: 11,66%
Envestio return 2019: 17,71%
Grupeer return 2019: 12,52%
Fastinvest return 2019: 12,7%
Swaper return 2019: 10,19%
BitOfProperty return 2019: 4,81%
The average platform return is therefore 11,6%. This is not to be confused with the average interest return of 12,6%. The reason my average interest return is bigger than the average platform return is because of the weighting in the portfolio size of the platforms. E.g. Envestio had a portfolio size of €1313 with an average interest of 17,71% and BitOfProperty had a portfolio size of 152,42 with an average interest of 4,81%. The weighting is, therefore, heavier towards Envestio’s portfolio size, with the average interest return proportionally higher based on the portfolio sizes.
The monthly interest and XIRR have been fluctuating between €12-€40 and 9,2%-15,8%.
|Month||P2P Lending Interest||P2P Lending Portfolio Value||XIRR|
The rolling average interest is 12,6%.
The Biggest Benefits
- Zero fees
- High returns
- Very passive investment
- Easy diversification
Based on the work that has been put into maintaining the portfolio the return is very satisfactory. I have used more time on my stocks in 2019 (which is sold back in July-2019) than I have on P2P lending. This just goes to show that the FinTech industry has made an impact on the everyday situation. Furthermore, when using stock platforms (in Europe) there are fees on buying, selling and sometimes portfolio fess as well. With P2P lending there are zero fees on most platforms. The platform’s business model is constructed to have the loan originators pay the fees associated with the loans (so essential the borrowers pay the fees to the loan originators).
It also goes to show from my 2019 financial statement that the returns from P2P lending are very high. While it is possible to get 100-200% returns when investing in IPO (Initial Public Offering), only a fraction of the IPOs turn out to be a success. However, with P2P lending the returns are “safe” in the sense that the loans do not fluctuate in value and the interest is paid in a fixed term and interest rate. This gives some comfort if you are not into seeing your portfolio fluctuating with ± 5% weekly.
Diversification is also made simple. Platforms like Mintos have 65 different loan originators that focus on different loan segments. there is a total of 8 different lending segment on Mintos. On other platforms like Crowdestor, there are no loan originators. However, they diversify by lending to different industries, such as mobile games development and real estate development.
The Biggest Disadvantages
- P2P lending is a young industry
- Can be difficult to spot the scams
The single biggest disadvantage of P2P lending is the age of the industry. P2P lending has been around since 2005, however, it has only recently been getting a lot of public attention. Looking at Mintos’s statistics it is clear that Mintos has been seen big growth in 2019. It is, therefore, possible to say that P2P lending is growing, but difficult to say if it will last.
Having the 2 platforms Envestio and Kuetzal disappear from one day to the next has taught investors a lesson on P2P lending. Both platforms offered returns of 15%-22% with buyback guarantees. The concerns started when someone discovered that the borrowers were fake and the projects did not financially make a profit. Then shortly after, there where no contact with the administrators of Kuetzal. A lot of investors got uneasy by the disappearance of Kuetzal and wanted to withdraw their funds from the simular platform Envestio. Given Envestio had a buyback guarantee on all of their loans, investors rapidly withdrew money. After a couple of days, Envestio disappeared as well. They deleted LinkedIn profiles and the website, left with thousands of investors’ money. This has taught me one very important lesson in an industry this young – transparency. While many P2P lending platforms have a buyback guarantee, there is no guarantee that the platforms have the funds to buy back thousands of investors’ investments. Furthermore, transparency has to be a big topic for the individual platform. E.g. Mintos, Grupeer, and Swaper issue loan agreements publicly. Mintos and EstateGuru issue financial statements. These are some of the few transparency aspects that make a platform just a bit more trustworthy at a short glim.
Next Steps for my P2P Lending Portfolio
If you have followed my monthly income statements you know that I don’t like that I cannot see the names of Fastinvest‘s loan originators. They have given out 1 loan originator so far. However, it is not possible to select the loan originator when investing on the platform. So currently they have actually just said that they are using this loan originator but with no way of selecting them. For this reason alone I have withdrawn fully from Fastinvest. With that being said, the platform is easy to use, and if they do manage to have better transparency in the future I might reconsider.
I will continue to invest in P2P lending, however, I will go for platforms that issue better transparency or is associated with credible management or subsidiaries. One example is LenderMarket and EstateGuru. In 2020 I invested with both platforms. LenderMarket is very new and does not provide much transparency, however, they are associated with CreditStar which is a big lending company across multiple countries. Second is EstateGuru which has some of the best transparency in the business currently.
You can already read my review of LenderMarket here.
What Would ThePoorInvestor Recommend?
Currently, my recommendation is to use Mintos if you are new in the P2P lending space and want to try it out. It is the biggest European P2P lending platform, has over 65 loan originators lending in 8 different types of loans, has multiple currencies (EUR, MXN, PLN, RUB and much more), and each loan originator is required to issue a financial statement to the platform. The financial statements can be found under the section “Loan originators” and click on the loan originator you wish to know more about (picture illustrating above).
Before investing it would also be a good idea to read some reviews of the platforms. Whether you read my reviews or other bloggers don’t matter as long you put a little effort into knowing something about the platforms. You can find my review in the top section or by going to my review section.