P2P lending’s high return rates explained: Alternative Lending Landscapes

Anyone who first hears about peer to peer lending and its amazing high-netting return potential is incredulous about all of its claims…I was…you were….everyone was! It just sounds like a scam.
After my initial skepticism was overcome (through thorough research and a bit of trial and error) I got hooked but still found it hard to explain to others how it all works: P2P lending’s high return rates explained.

On this website I have previously explained the basics of how p2p lending works but I kept on struggling finding a proper explanation for how and why peer-to-peer lending platforms are capable of generating annual return rates between 10% and 30%….those numbers just sound too crazy to be true….
By now I know they aren’t fantasy as I managed to make a 20.92% return on one platform and 15.59% on some other….
With this post I will explain how exactly p2p lending platforms are capable of generating such high ROI for its lenders…

Alternative lending landscape: Payday, Micro, Online & P2P Loans compared

The rise of the internet and deregulation of traditional banking and lending were the enablers of a new alternative lending landscape that emerged at the turn of the century.
Basically there are different types of loan offerings for different type of needs. And we have to look at the different type of loan offerings to understand the high interest return rates being offered by p2p lending platforms.

Payday loans

Payday loans (see infographic below) are small cash advances at a very high interest rates to be paid back when the borrower receives his next paycheck. Common interest annual percentage rates (APR) are in the 391-521% range!!!!!!

Most borrowers using payday loans have bad credit and low incomes and therefore may not have access to credit cards and are forced to use the service of a payday loan company. Payday loan providers therefore can charge exorbitant high interest rates which are calculated on a daily or weekly base e.g. $17.50 interest fee per $100 borrowed for seven days. Most loans are for 30 days or less with loan amounts usually between $100 to $1,500.

The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash. The lender holds onto the check and cashes it on the agreed upon date, usually the borrower’s next payday. These loans are also called cash advance loans or check advance loans.

In the USA alone 12 million people use payday loans with a total borrowed amount of $7 billion.

Micro loans

Micro loans are a mission-driven form of finance aimed at small business owners who want to borrow $50,000 or less. The interest APR is commonly in the 8-22% range.

According to the Small Business Administration, its microloan program provides micro loans in order for businesses used “for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment.”

In banking terms, a microloan is a very small loan ranging from $500 to $100,000. Historically, banks in the United States haven’t particularly liked dealing with microloans because they have not been profitable financial products for them to market. Other financing companies and institutions have filled this void.

Online loans

Typical loans are for small business owners who want/need quick money and don’t mind paying a hefty fee in exchange for speed. Typical annual percentage rates range from 30-120%.

In its broadest sense, online lending is any kind of loan that’s not directly from a traditional bank and often online lenders are technology companies that use different methods to communicate with clients, base rates and approval on metrics other than your FICO credit score and similar traditional measurements and apply a different (frequently streamlined or automated) approval process compared to traditional lenders. This enables them to provide loans super quickly when needed by a borrower.


alternative lending landscapes: p2p lending's high return rates explained through payday, micro, online loans
Alternative lending landscapes: payday, micro, online & peer-to-peer loans compared

P2P lending’s high return rates explained

p2p lending marketplaces arose in 2005 by combining the alternative finance services as described above with crowdfunding. Basically p2p platforms cut out the middleman aka the payday/micro/online loan provider by bringing borrowers and lenders directly together through their platform/marketplace. By doing this p2p lenders don’t need to have cash at hand themselves which greatly reduces their costs. Their core competence is the platform technology and loan approval automation. By charging small fees (typically around 1%) they can create a highly profitable business that is beneficial for them, the borrower and lender. The borrower can find loans with lower APR’s and the lender can get higher ROI on his investments in this new p2p lending model. Win-win-win for all three parties.

The high return rates investors can make on p2p lending platforms are understandable if you look at the loan services they compete with. Payday loans, micro loans, online loans all charge super high annual percentage rates to their borrowers. p2p lendng platforms offer these loans too but at much lower percentages due to their low cost structure. In that light a payday borrower loaning at say 30% interest on a p2p platform is not strange at all as he would pay a multitude of that through a traditional (payday) loan institution. And an accompanying ROI of 20%+ for lenders/investors is a logical consequence thereof. Just very sound business principles at work here.

Hope this post was useful in understanding better how p2p lending platforms are capable of generating high return rates for lenders. And it definitely helps explaining how I was capable of making a 20.92% return on my investments through one of my favourite p2p lending platforms here.

Question? post them below in the comments…


What is peer-to-peer lending? – a visual explanation in infographics

p2p lending is a very new market and finance instrument that emerged in 2005 through the creation of the world’s first p2p lending marketplace Zopa. Ever since then the field has been developing and growing at an exponential rate and more and more people have heard about it. But what is peer-to-peer lending exactly?
Not many people have crystal clear view of the working of p2p lending. And logically so as each p2p lending platform and marketplace works a bit different than the other one.
Today we will explain you the workings of p2p lending through a bunch of the best infographics and visual illustrations available around the web.

What is peer-to-peer lending?

In its simplest form Peer-to-peer lending, as the name implies, means lending money to individuals, or “peers”, without going through a traditional financial intermediary such as a bank or other financial institution. Instead online p2p lending platforms and marketplaces such as Bondora, Mintos, Crosslend, Zopa, LendingClub,..  work by matching individual lenders and borrowers online. In this way it leads to great rates for both borrowers and lenders because it’s more efficient.

Wikipedia defines peer to peer lending as follows:

Peer-to-peer lending, sometimes abbreviated P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers. Since the peer-to-peer lending companies offering these services operate entirely online, they can run with lower overhead and provide the service more cheaply than traditional financial institutions. As a result, lenders often earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates, even after the P2P lending company has taken a fee for providing the match-making platform and credit checking the borrower.

p2p lending explained in infographics

A picture is worth a thousand words!

This idiom still holds a great deal of truth and hence we bring you a couple of visual explanations of what p2p lending exactly is through some great infographics.

What is peer-to-peer lending? an explanation infographic

How peer-to-peer lending works, infographic

We hope these explanations have given you a better idea of what p2p lending is. If you have anymore questions please add them in the comments below and we will answer them swiftly.

Happy p2p lending.

For a detailed look at my personal experiences investing in p2p lending platforms for the first time have a look here. 

How p2p lender Bondora is outperforming the S&P 500 stock index since 2009

Pan-european p2p lending platform Bondora was founded in 2009 and ever since its inception it has been making stellar returns for its investors. And to many investors’ surprise the popular p2p lender has been outperforming the stock market and even the S&P 500, one of the world’s most important stock market indices. This is how it went…

Data transparent p2p lender Bondora

The beauty of Bondora is that it is the most transparent p2p lending platform around and it has made its loan data publicly available. This makes it possible to compare its lifetime return rates with other investment vehicles – like stock and bond investing – to find out (in hindsight) what indeed would have been the most profitable investment.

To do exactly that we decided to compare Bondora’s return rates with those of the S&P 500 index, one of the world’s most well-known stock market gauges.

And surprisingly Bondora outperformed the S&P 500 big time in the seven years the p2p lender has been around….

The S&P 500 stock market index

The Standard & Poor’s 500, often abbreviated as the S&P 500, or just “the S&P” is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. (and hence world) economy.
The “Composite Index”, as the S&P 500 was first called when it was introduced in 1923, began by tracking a small number of stocks. Three years later in 1926, the Composite Index expanded to 90 stocks and then in 1957 it expanded to its current 500.

To compare the Bondora and S&P return rates we start our comparison in the year 2009, the year Bondora was founded.

S&P 500 Annual Return rates 2009-2015

The S&P 500 annual return rates between 2009 and 2015 are displayed below.

S&P 500 stock index annual return rates 2009-2015

Firstly, do note that there are return rates excluding and including dividend payouts.

For our considerations – comparing the performance of the S&P 500 with p2p lending performance – we will only look at the higher numbers that include dividends.

You can see that this annual return rate including dividends has fluctuated widely over the seven year window that we are considering. The lowest S&P 500 return rate was 1.30% (in 2015) and the highest 32.43% (in 2013).

The S&P 500 arithmetic average growth rate (AAGR) for 2009-2015 is 15.35% and the compound average growth rate (CAGR) for that same period came to 14.86%

Bondora Annual Return 2009-2015

Bondora started in 2009 as a p2p lender offering only loans in Estonia (EE). Then in 2013 it expanded its operations to offer loans in Spain (ES), Finland (FI) and a year later Slovakia (SK).

Bondora’s annual return rates across all these markets from 2009 to 2015 are displayed below in the bottom row (ALL). This total return rate per year is calculated as a weighted average across the different countries.

p2p lender Bondora's annual return rates 2009-2015. are they outperforming the S&P 500 ?

Though some countries experienced slight declines in returns in 2013 and 2014 the totals still represent double digit gains for every one of the last seven years.

Bondora’s annual average growth rate (AAGR) is 20.37%  compound average growth rate (CAGR) for 2009-2015 is 19.87%.

Outperforming the S&P 500

Now lets compare both of these investment options and see which one would have netted you a higher return since 2009. Find the comparison below.

p2p lending platform Bondora is clearly outperfomring the S&P 500 during 2009-2015

It is clear that in some years the S&P 500 index performed better and in some other years p2p lender Bondora would have given you greater returns.

In the bottom half of the table you can see that on average however Bondora would have given you a 5% higher return rate every year over the 2009-2015 period (5.02% or 5.03% depending on if you use the AAGR or CAGR) clearly outperforming the S&P 500.

What this concretely means for investments made in both products becomes clear from the last columns in the table. If you would have invested $10,000 in 2009 in both Bondora and the S&P 500 your money would have grown to $35,561 at Bondora and $26,374 at the S&P 500.
An investment at p2p lender Bondora therefore would have made you a higher absolute gain of $9,187 or a higher relative gain of (9,187/26,374)*100 = 34.83% over the entire 2009-2015 period.

That’s both a surprising and substantial difference where Bondora is clearly outperforming the S&P 500 over the period 2009-2015.

Conclusion: p2p lender Bondora vs. S&P 500 

 Logically these results are by no means a guarantee for the future. They do indicate however that p2p lender Bondora offers great returns that are capable of beating the S&P 500 returns. Investing in p2p loans therefore could make for a great addition to anyone’s investment portfolio. It increases ones diversification and could potentially even raise your total investment portfolio’s performance.

For more info on Bondora have a look here. 

My p2p Lending Experience: Crosslend 15.59% Return after 8 Months

While researching the p2p lending market I stumbled upon the German based Crosslend platform. They offer p2p loans to borrowers in Spain, the UK, Netherlands and Germany and appear to be a highly ambitious platform with founders that have an extensive background in FinTech.

As they were a relatively new and small p2p lender in the beginning of 2016, that wanted to grow fast, they were offering a 10% bonus for every euro invested up to the 31st of March 2016. This sounded like a great deal to me and so I decided to try it out….

Crosslend p2p lending marketplace team

Europe cross-border lending

Like Mintos and Bondora, Crosslend is a pan-european p2p lending platform that uses market inefficiencies across european countries to create a win-win situation for both borrowers and lenders. As they state on their website:

“It’s our vision to reduce the gap between supply and demand within traditional lending in the European market by connecting borrowers from high-interest-rate countries with investors from low-interest-rate countries through our unique cross-border marketplace lending platform. We’re bridging Europe’s credit divide to create fresh opportunities for people on both sides of the coin.”

This form of interest inequality and arbitrage is one of the reasons p2p lending in Europe has such high potential as opposed to single country p2p lenders in for example the USA or the UK.

Crosslend's current p2p lending markets
Crosslend’s current p2p lending markets

Opening an account with Crosslend (March 2016)

In March 2016 I opened an account by registering on the Crosslend website which was quick and easy.

Crosslend works a little bit different than for example Mintos or Bondora as they have a short video verification process to check your identity. After this is done Crosslend will open an investor account for you with their partner bank, the German biw Bank. This is a real bank account through which you will make all your investments and receive your payouts. It takes a couple of days to get it all set up as the bank needs to send you your account details and login credentials and codes by ordinary post. For me it took about a week to get it all up and running.

Once that was done I could start making my first investments in the loans offered on the Crosslend platform.

How Crosslend borrowing & lending works

On the Crosslend platform potential borrowers can apply for loans from 1,500 to 30,000 Euro for loan terms ranging from 6 to 60 months.

When a loan is granted to a borrower on the Crosslend platform it is purchased and acquired by Luxembourg based Crosslend Securities SA and securitized by a series of ‘notes’. Notes are debt securities which can be purchased by investors each with a denomination of €25 which is the minimum investment per note/loan. When a borrower makes their loan repayments, CrossLend Securities SA makes the corresponding payments of interest and principal pro rata to the holders of the notes and this money is deposited on your biw Bank account.

The Crosslend process matching borrowers and investors to finance loans
The Crosslend process matching borrowers and investors to finance loans

Crosslend’s loans are graded in risk classes A to G, HR.
A graded loans have the lowest risk and lowest interst rates (around 4%) while HR are on the complete opposite end of the spectrum with high risk and high potential interest payouts (around 17%) Crosslend checks submitted proofs of income for all borrowers.

Making my first Crosslend investments

After having finished the registration and verification checks of Crosslend I deposited my first sum of €900 on my account by wiring the money from my Dutch bank account to my Crosslend linked biw Bank acount with a free SEPA bank transfer. It took one day before my money arrived.

Subsequently I started hand-picking loans (or notes as Crosslend calls them) on the website as Crosslend does not have any auto-investment tools. I used the following criteria for my loan choices:

  • Loans from a variety of countries (Spain, UK, Germany, Netherlands) for diversification purposes
  • interest rate above 10%
  • Maximum loan duration of 36 months
    I don’t want to tie up my money for too long hence my aversion for loans of 60 months.
  • Loans among all risk categories from A to HR rated but slanted towards more E, F and HR loan investments

With a €25 minimum investment per loan and a 1% fee charged by Crosslend on origination it means that the minimum cots per loan is €25.25.
My original deposit of €900 allowed me therefore to invest in 39 loans. It took me a couple of weeks to find 39 loans as the amount of loans available was with 48 pieces pretty low. However after logging in multiple times in March each time I found new loans had been added to the platform. After a couple of weeks I managed to find 35 loans that fulfilled my criteria.

Crosslend investment results after 8 months

Now after 8 months my Crosslend dashboard shows the following results:

My Crosslend dashboard account overview (November 2016)
My Crosslend dashboard account overview (November 2016)

As you can see the projected annual return rate of my loans is 15.59% and my initial €900 has grown to €1162.67. It has to be noted that part of my total revenue is the 10% bonus Crosslend awared on investments made in March.

All in all I am happy with the returns so far…let’s hope it keeps on going like this. Will keep you posted!

World’s first P2P lender Zopa to lauch online Bank

Zopa – the world’s first peer-to-peer lending platform launched in 2005 – has announced plans to become an online bank in order to challenge the traditional banking industry.

Zopa to launch online bank

Zopa, Britain’s biggest p2p lending marketplace has applied for a banking licence to launch a “next generation bank”. This planned bank will operate in parallel to its existing lending/borrowing business.

Zopa to launch online bank …it sounds crazy that a p2p lender is really aiming for it…but it makes sense.

By applying for a banking licence Zopa can offer its customers protection through the Financial Services Compensation Scheme, just like normal banks do on its customers current and savings accounts.
Zopa expects the licence approval to take up to two years.

When launched, the platform says it will offer term-deposit accounts for savers and revolving lines of credit for borrowers, although a spokesman admitted that they are still working out the full details of it.

world first p2p lending platform Zopa to launch bank
Zopa is planning to lauch an online bank

By offering deposit accounts and overdrafts to its customers Zopa wants to use its extensive online lending experience to create a ‘next-generation’ bank that will challenge the current players in the financial markets.

P2P lending as the future of finance

Zopa CEO Jaidev Jardana announced:

“We launched in 2005 to create a richer life for everyone by making money simple and fair. We have lent over 1.8 billion GBP and inspired a 100 billion GBP global industry. We have built a profitable, scalable and viable business. Yet we’ve only just begun. We want to launch a next generation bank to drive greater choice for borrowers, savers and investors, which is good for consumers and good for the economy. We are uniquely placed to re-define customer expectations of what a bank should deliver in the 21st century. Over the last 11 years we have delivered great value to borrowers and investors whilst prudently managing credit risk. Combining our pioneering data and tech-led culture with an obsession with fairness and customer experience, we are best placed to shape the future of personal finance in the UK.”

Zopa CEO Jaidev Janardana (left) with co-founder Giles Andrews

New technology freeing the way to a banking license

New technology and freedom from banking regulation has meant that peer-to-peer lenders aim to offer better rates of interest to both savers and borrowers than conventional bank accounts.
The platforms (like Zopa, Mintos or Bondora to name a few) pair up savers, who want to lend their money, with small businesses or individuals who need a loans using modern web technology and match algorithms to beat the banks. The high interest rates an investor/lender can make goes hand in hand with a higher risk as the peer-to-peer lending market does not offer the protections of a bank, leaving customers exposed to potential losses. With a banking license Zopa aims to cover these risks by means of the Financial Services Compensation Scheme (FSCS).

Current low interest rates have pushed more savers to look at peer-to-peer as a way to generate returns on their savings. And with many platforms offering 10+% interest rates this makes loads of sense.

Lets hope Zopa manages to get their license so they can keep revolutionizing the financial system for the good of borrowers, lenders and the ordinary man.

Goodluck Zopa!


My P2P Lending Experience: Bondora 20.92% annual return after 10 months

After my first ever p2p lending investment on Mintos (as elaborated here) I started looking for other interesting platforms to try out. On the one hand for diversification reasons and on the other hand to see which of the many available p2p lending marketplaces delivered the best mix of high returns, ease-of-use, passive auto-investment features, transparency, regular reporting,…etc.
Basically the goal was to try to find – by investing in real life – the overall best p2p lending platform. And Bondora was my second pick. 

Bondora p2p lending marketplace

The second marketplace that caught my attention at the beginning of 2016 was Bondora. An Estonian platform that had been around since 2009 who was stirring up the world of p2p lending with its own novel approach delivering unbelievable results.


Bondora focuses on unsecured consumer loans with principal amounts of EUR 500 to EUR 10,000 and repayment terms ranging from three to 60 months serving borrowers from Estonia, Finland and Spain. It is open to private investors from Europe and accredited investors from other, non-European countries.
It is noteworthy to mention that Bondora does not provide any form of secured loans (loans backed by a collateral) in the way that Mintos does.

Ever since its emergence in 2009 Bondora claims to have made an impressive annual ROI for its investors of 16.2% !! In fact they claim to be the highest yielding p2p lending platform in the entire world.

On top of that Bondora claims to have the biggest secondary market, to be extremely transparent through their advanced analytics tools while charging no fees for investors.

Bondora’s impressive general lifetime statistics since its birth in 2009

Click the above picture to enlarge or find the info on Bondora’s website here

Add to these impressive statistics the fact that Bondora is the most licensed platform in Europe – having been authorized in the US by the SEC, in Estonia by the FSA, and in Finland by the RSAA – and it almost sounds too good to be true

Given these claims it was a logical pick for me to try out and see if Bondora could really live up to these stellar numbers in reality for a non-experienced p2p lender.
So I put down some money in a multitude of loans at the start of 2016 and now, after almost one year investing with them, I can say they have performed way beyond my expectations… with an amazing 20,92% annual return as a result.

Here is how it went…

My initial Bondora investment

I created an account on the https://www.bondora.com website on January 4, 2016.

The registration starts by filling in some personal details and an identity verification check is achieved by uploading a copy of your passport or ID. You also have to send a scan of a recent bill addressed to you on your home address to verify that address. All of it was quick and hassle-free.

On my account page I then easily found Bondora’s bank account number where to deposit funds into my Bondora account. For European bank accounts (including Swiss, UK and Norwegian accounts) money can be wired through a free SEPA transfer using Bondora’s IBAN bank account number. Recently Bondora has also added the low-cost option of Transferwise money transfers which work globally.

I wired €1000 to the Bondora account number and the money arrived the next day on my personal Bondora account (January 5, 2016 to be precise). I was notified by email when the money had arrived. 

To start investing I activated Bondora’s Portfolio Manager (PM) in my accounts Dashboard. The portfolio manager is Bondora’s auto-investment manager. At that time, in the beginning of 2016, Bondora’s Portfolio Manager let you choose between three different Risk-Return Strategies: Conservative, Balanced or Progressive. The strategies differ in their respective expected returns and risk (with risk referring to the amount of chance you have to deviate from the predicted returns).

Bondora’s old Portfolio Manager and accompanying risk-return strategies

In its simplest form a Conservative strategy means lower risk with lower expected returns up to a Progressive strategy that implies higher risk with potential higher returns. You can see that in the screenshot taken from the portfolio manager at the time.

I activated the Balanced setting on the Portfolio manager and then…well just sat back and waited. Bondora started to invest in p2p loans for me with their investment algorithm. It does so by investing in €5 portions. After a couple of days my entire €1000 euros had been invested in 200 loans of €5 each. The low investment per loans is great as it means a easy way of diversification even with relatively small amounts invested on the platform.

After your first investment you have to wait three months before Bondora can provide you with a Return on Investment percentage as they need to gather enough data to come up with a sensible number. In the meantime they provide you with a daily email update about your incoming and outgoing payments. You can also login anytime in your account and see many detailed statistics about your account.

My net return on Bondora after my first five months using the ‘Balanced’ portfolio manager was hovering around 15%.

Wow…I was very happy.

As I was using their Balanced Risk-Return Strategy in the Portfolio manager with an expected return of 14.85% my portfolio was performing as Bondora had predicted.

I was well impressed. And not only by their returns rates…

Transparent reporting and communication

What I really got  to like about Bondora while using it for some months is its regular reporting and clear communication effort towards its investors.

They provide you with daily email updates regarding the state of your investment portfolio and also twice weekly emails with a diverse amount of highly informative info: from new dashboard features, investment options, platform updates to general p2p lending trends and industry updates. It really keeps you in close touch with your portfolio and the platform. Bondora really makes an effort and provides you with a steady stream of valuable information that made me have an ever growing trust and appreciation for Bondora. 

My Bondora portfolio changes

After some months I slowly started to invest more money and I went  from €5000 invested towards  €10.000 invested at the end of August 2016.

At the same time, as my trust in Bondora had grown, I also changed towards the Progressive Risk-Return Strategy of their Portfolio Manager.

Then mid-summer 2016 Bondora changed their Portfolio Manager (PM) slightly adding an ultra-conservative (lowest risk, lowest return in the PM) and opportunistic (highest risk, potential highest return) option. See the screenshot below.

Bondora’s new portfolio manager. Notice the new ultra-conservative and opportunistic investment options

Eventually, in September 2016 I went for the high risk, high potential return ‘Opportunistic strategy’ and that is what I have been using up to now in November 2016. 

Changing from an initial Balanced strategy towards the Progressive and subsequently Opportunistic strategy has served me well as my net return grew substantially….

20.92% return after 10 months investing in Bondora

With the aforementioned settings I managed to achieve a 20.92% net return after 10 months of investing on the Bondora platform. This almost unvelievably high number (especially compared to putting your money on a savings account with a bank) is actully completely in line with the expected return of 21.23% using Bondora’s opportunistic risk-return strategy. See the screen shot from my Bondora profile dashboard below for the details. 

Achieving a 20.92% annual return rate on p2p lending platform Bondora after 10 months


You can see from the screenshot above that I made a net profit of €793 euros over those 10 months.

Bondora beating the stock market

A recent comparison of the return rates of Bondora and the stock market in general revealed that Bondora, since its inception in 2009, has been outperforming the stock market. As crazy as it sounds, p2p lender Bondora’s annual return rate was on average 5% higher than the S&P 500 stock market index’s return rate.
It really is a sign that the relative new investment vehicle that is p2p lending is actually a very promising one that is there to stay.

For the entire in depth story check ‘How p2p lender Bondora is outperforming the S&P 500 stock index since 2009

My Bondora verdict after 10 months

Bondora is a great platform that has impressed me in every way. The platform is highly transparent, has a great user interface/dashboard that is very easy to use and full of features, communicates great with its investors and provides quick support if you contact them. Add to that the very high return rates and I feel they are indeed one of the better p2p lending marketplaces out there. At least the best one I have found so far.

I am very satisfied with my investment results after 10 months and hence will keep using the same progressive PM strategy in the near-future. I will regularly post updates of my portfolio performance here to keep you informed.

If you are interested in trying Bondora out for yourself click here and get a €5 free starting sum to kickstart your p2p-lending-life!

Bondora vs. Mintos

My Bondora return of 20.92% is much higher than the 11.28% which I achieved on the Mintos platform (described here). However taking into account that a big part of my Mintos portfolio consists of secured loans with a buyback guarantee (which have lower interest rates, and lower risk on default) this difference fully understandable.
Investing in both platforms is a great idea for diversification reasons and this is what I will keep doing as I think both are great p2p investment platforms each with its own strengths.

If you have any questions regarding my portfolio or investing on the Bondora p2p-lending marketplace post them in the comments and I will reply to them.

My first P2P Lending Experience: 10 Months of Investing in Mintos with a 11.28% return (+ buyback guarantee)

After having been convinced that p2p lending is really the new undiscovered investment tool that it promises to be I decided to give it a shot at the beginning of 2016 which resulted in my first p2p lending experience…

Having done my research for some the last months of 2015 I was ready to make my first p2p lending investments and start the big p2p lending experience experiment.

The very first platform I invested money on was a relative newcomer from Latvia called Mintos. To find out all about My Mintos Investment experience read on…

Why I chose Mintos as my first p2p lending platform

Mintos was founded in january 2015 and quickly gained market traction through their transparent and novelty platform. One of the great features that made Mintos popular was (and is) that they allow you to invest in loans with a buyback guarantee greatly reducing an investor’s risk (more details about this below)

As opposed to many other platforms (who only offer unsecured personal loans) Mintos offers a great diversity of loans: from secured mortgage loans, personal unsecured loans, secured car loans to small business loans.


The minimum investment in one loan on Mintos is a mere EUR 10 making it a great starting point for new investors as you can create a nice diversified portfolio with relatively little money.

Both the buyback guarantee option and the low minimum investment of €10 were the reasons why I choose Mintos as my first p2p investment marketplace.

And I was definitely not the only one.


As per November 2016 Mintos has 14.870 registered investors which funded an impressive total loan volume of € 83 687 094

Lower your risks with Mintos buyback guarantees

If you are new to p2p lending and investing the buyback guarantees require a little bit more explanation.

Most p2p lending platforms and marketplaces provide unsecured personal or business loans, meaning there is no collateral to back the loan. The platforms use an extensive analysis of each person and business that applies for a loan taking into account many factors the likes of: monthly income, are they homeowners or not, debt history, credit card payment history,….etc. By analysing these factors they create a risk profile and based on that they decide if the applicant gets a loan and for which interest rate. High risk loans offer investors high interest rates but at the same time they have a high chance of defaulting (meaning the borrower doesn’t pay back the loan). As there is no collateral this can mean that an investor loses his invested/lended money. By diversifying your loans over many different loans with varying risks you can lower your risk…and this is what most investors do.

When Mintos entered the market they decided to offer secured loans. Up to that moment this had not been done on a large scale yet in the p2p lending market. And Mintos therefore created a great new addition with these loans.

Buyback guarantee loans will net you, as an investor, less interest than unsecured loans, but it will greatly reduce your risk as Mintos will buyback the loan whenever the borrower defaults on his payment obligations for 60 days or more. In such a situation Mintos will pay you 70% of the original loan contract meaning that the maximum loss you run on such a loan is only 30%. This is a great system that greatly reduces your risk as a lender.

Mogo is a loan originator on Mintos that offers secured car loans with a buyback guarantee

Currently Mintos pays a maximum of 13.5% interest rates for buyback guarantee loans through Mogo, a secured car loan originator. A great return rate for loans that have very limited risk. They are one of my favourite loans to invest in on Mintos. 

My first P2P Lending experience: a review of 10 months investing on Mintos

In January 2016 I opened an account on Mintos which was a very easy process. I had to fill in my details and upload a piece of ID for identification purposes but within 3 days I had a functional account. I wired €1000 to the account and started my great p2p lending experiment.

As I was new and wanted to limit my risk I started investing in loans with a buyback guarantee in €10 portions to guarantee make my first p2p lending experience devoid of too much risk.

Mintos has an auto-investment tool that allows you to let them do the investments according to criteria you set. It takes away the manual and time consuming task of manually making offers for each and every loan you want to invest in. And it is completely free and easy to use.

I used the following criteria in their auto-investment tool:

  • Must have a buyback guarantee
  • Interest rate between 8 and 20%
  • Loan term from 1 to 120 months
    This means short term loans and long term loans up to 10 years. I did this to include some of  the mortgage loans offered on Mintos which are always long term loans.

And with these settings I hit the ‘save’ button and Mintos started doing the investment work for me.

When I returned to the mintos website a couple of days later my €1000 had been neatly invested in 100 loans and I was eagerly waiting for the first principal and interest payments to roll in. And this is what happened. Slowly small payments were coming in and I was loving it.

It was very exciting to return to my online account on a daily basis and see that I had received another couple of euros.

For the first couple of months I was always hovering around a return on my investment of aournd 10%. “This is great I thought”. And it was compared to my 0.7% interest rate on my Dutch savings account at the Rabobank.

It was a great encouragement and I decided to invest in some more loans on Mintos. I added a couple of thousand or euros more and devised a couple of new auto investment settings in order to try to raise my return. The biggest change I made was that I changed my minimum required interest rate to 12% in the auto investor and left the other settings more or less unchanged.

And it worked.

Slowly my interest rate crept towards, and eventually surpassed, the 11% net annual return rate.

As I got more comfortable with Mintos I also got more comfortable with taking a bit more risk. I started investing in some higher netting loans of around 15% without a buyback guarantee. On the one hand to diversify my portfolio and on the other hand to increase my total net annual return.

And it worked again.

Now after just over 10 months of investing on Mintos my Net Annual Return is a great 11.28% and it is still slowly rising every week due to the repayments of the higher 15% interest loans.

my first p2p lending experience 11.28% after 10 months on Mintos
My personal annual return overview of 11.28% after investing 10 months on Mintos [Click to englarge]
In 10 months time I have made €303.40 interest on an average invested amount of €3228. (For some months I had €5000 invested but I have lowered this amount in order for me to be able to try out a bunch of other p2p lending platforms too). 

I am very happy about this and it has made me very enthusiastic about p2p lending as a savings and investment tool. All in all my first p2p lending experience has been a very positive and encouraging process. 

I will soon write more about some of the unique features that I like about Mintos through an in depth analysis of this great platform.

For more information about p2p lender Mintos have a look here.
For my experiences with high-netting and the 2nd platform I ever invested in called Bondora keep reading here.


P2P lending & investing: light in the darkness of a confusing market with p2plendingexperiences.com

When you first hear about p2p lending & investing – like myself – you think all the claims of making double digit returns seem just too good to be true. It just sounds crazy that you can make between 10-20% on your investments (loaned amount) on platforms with exotic sounding names like Bondora, Mintos, Crosslend, Omahara, FellowFinance, Zopa, Funding Circle, RateSetter, Prosper, Lending Club, Dianrong……and many many more.

Your mind really goes in overdrive and fills itself with questions the likes of:

  • Can I really make such high interest percentages? And if these 10-20% interest earnings are true how is this even possible?
    (yes it is both possible and easy if you pick the right platforms)
  • Which platforms are the best and most trustworthy to use?
    (a whole bunch of them have been around for 10 years while making double digit interest percentages for their clients all-along)
  • How long do I have to put my money away for? And if I ever need it on a whim can I get to it?
    (yes, certain platforms led you sell your loan portfolio with one-click guaranteeing a high liquidity)
  • What are the risks involved?
    (borrowers who default on their loans, platforms that go bust,…etc…There are definitely risks, but so is investing in the stock exchange. If you do it right though p2p lending has less risk and a more steady return than any other form of investing or saving money)
  • Is there a chance I will loose my money? (yes, but with buyback guarantees you can limit it greatly)
  • Do I need to actively manage my money or is there also a lazy secure way? (yes, loads of platforms offer auto-invest options)

These are just a few of the questions that hit me when I first heard about the exciting world of p2p lending. It was all highly confusing and a lot of information to take in…

So I started researching the world of p2p marketplace lending a bit. I dove into articles and blog posts and slowly learned that it is a very new but quickly developing side of FinTech (Financial Technology) with an amazing potential. The more I read, the more excited I got about it.
Couple this with the fact that my savings account interest percentages where quickly heading towards a 0% interest rate and I grew even more determined to give p2p lending a try.

What exactly is p2p lending?

p2p lending & investing is banking without banks

Let’s first start with a little explanation of what p2p lending exactly is.

Peer-to-peer lending, often abbreviated P2P lending, is the practice of lending money to individuals or businesses through online services/platforms that match lenders directly with borrowers. Since the peer-to-peer lending platforms offering these services operate entirely online, they can run with lower overhead costs and provide the service more cheaply than traditional financial institutions. As a result, lenders earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates, even after the P2P lending platform has taken a fee for providing the match-making platform and credit checking the borrower.

As you can see p2p lending is a field that emerged due to internet technology enabling the direct matching of borrowers and lenders. The beauty of modern technology allows you to become your own little bank lending out a couple of hundred or thousand of Euros or Dollars and receive a nice interest percentage on it.

P2P Lending & investing history around the world

The first company to offer peer-to-peer loans in the world was Zopa, a UK based platform that is still going strong these days. Since its founding in February 2005, it has issued over £1.5 billion in loans. In 2010 Funding Circle became the first significant peer-to-business lender launching in August 2010 and offering small businesses loans from investors via the platform. Funding Circle has lent over £1.3 billion as of March 2016.Ever since 2005 many new platforms have arisen all over the world providing alternative ways of financing for individuals and businesses.

The biggest p2p lending market in the world by far is China where it is a 60 billion dollar industry with over 4000 different p2p lending platforms serving the hundreds of million of people that are not served well by the traditional banking system. It really is a booming (and sometimes shady if you don’t do your due dilligence) over there.

The modern peer-to-peer lending industry in US started in February 2006 with the launch of Prosper, followed by Lending Club and other lending platforms soon thereafter. Both Prosper and Lending Club are located in San Francisco, California and they are currently still the largest platforms in the USA market.
Early peer-to-peer platforms had few restrictions on borrower eligibility, which resulted in adverse selection problems and high borrower default rates which resulted in many investors loosing money in the early years.

In 2008, the Securities and Exchange Commission (SEC) required that peer-to-peer lending platforms register their offerings as securities, pursuant to the Securities Act of 1933. The registration process was an arduous one and Prosper and Lending Club had to temporarily suspend offering new loans.
The regulation proved to be very useful cause after relaunching and reinventing their p2p lending process both of the platforms have managed to make steady returns for their investors post 2010.

p2p lending in Europe has its own unique features that make it a very promising market. The fact that the EU zone comprises many different countries, each with their own financial basics and interest rates, makes that one can profit hugely by market inefficiencies across the entire continent.
Bondora was the first one to recognize this huge potential by becoming the first pan-european lending platform. Basically any European can invest in their loan offerings in different countries. After them many other platforms followed their model.

How I got into p2p marketplace lending

As you can see the p2p lending &investing market is diverse, confusing and abundant. That’s what I thought the first time I started diving into the concept.
Initially I was very skeptical and quite reluctant to give it a try. That all changed when I read an article by Marc van der Chijs, a well-know serial entrepreneur, venture capitalist and (angel) investor. On his blog marc.cn (which I had been following for a while) he wrote about his personal – and highly positive – experiences of years investing in Chinese and American p2p loans on Prosper, LendingClub and Dianrong. The article was named “why p2p marketplace lending is so succesful” and it was a real eye opener by someone I regard highly.

It really was a key moment that made me realize it was about time to try out this promising new investment vehicle myself…

A p2p investment experiment by average Joe

To find out how p2p lending and investing really works in practice I decided to turn my personal p2p investment trials into a big experiment. After some initial research I invested some money in a couple of platforms to see first hand how they differ in their approaches and returns. And on this website I will describe my personal experiences with these platforms: the do’s, the don’ts and all the things I learned along the way.

I am by no means a financial expert. Just your average Joe who started looking for alternative ways to use his modest savings (several thousand euros) as the bank’s interest rates started dwindling a couple years back.

I will describe my p2p lending experiences as a very average user that is interested in making his money work for him in a relatively passive way. I don’t like having to actively watch my accounts often and prefer using auto-investment options. This stems from my lack of deep financial analysis experience (I am a finance average Joe after all) and my lack of willingness to devote too much time to money management.
Over time I have learned a lot and I especially learned that it is very possible to passively invest my saving in different p2p lending platforms while making solid returns of between 10% and 20%.

This website documents my story of how I got there…

And it all started with my investments in Mintos & Bondora at the start of 2016. Find my detailed investment experiences with those platforms.