According to FORBES the Peer to Peer lending (P2P market) is growing rapidly and it is a great fixed income for investors. P2P investments also have low volatility and a low correlation compared to the stock market.
Interest rates are at all-time lows and the normal historically “safe” investments are not as good as it used to be. Investing in P2P loans is a no-brainer 2019.
Below, I list the best peer to peer sites today for investors. You will have a quick overview of the average rate, my view of the sites and other important metrics for the platforms.
Under this list of P2P platforms I will answer the most important topics around how P2P lending work and give you some advice.
Quick overview of P2P sites
More information on the best Peer to Peer sites today
|Mintos launched 2015 and is now the world’s largest when it comes to P2P investments and Multi lending platforms. Here you can invest your money and get an average return of 12,4 %. They also offer a great buyback guarantee. Just create an account at Mintos to see the loans you can invest in. Minimum investment is only € 10 per loan.|
|AVERAGE RETURN: 12,04 %||TOTAL INVESTED: € 3 556 543 436|
|NUMBER OF INVESTORS: 194 486||LOANS AVAILABLE: +300 000|
|BONUS: 1 %||READ MY MINTOS REVIEW|
|BUY BACK GUARANTEE: YES||Loan Originators: 65|
|Grupeer is one of the platforms that’s getting more and more attention and investors because of the easy going interface and setup for the platform. You can invest in business loan deals, real estate and their own stability fund. All investments are secured with buyback guarantee.|
|AVERAGE RETURN: 13,32 %||TOTAL INVESTED: € 31 917 897|
|NUMBER OF INVESTORS: 16 997||INVESTORS FROM 86 COUNTRIES|
|BONUS: ON SPECIAL PROJECTS||READ MY GRUPEER REVIEW|
|BUY BACK GUARANTEE: YES|
|Envestio is one of the best P2P platforms today in my point of view. They offer to invest in projects from companies which is a nice approach. Interest is in the top percentages to get today. Sometimes they even have projects that will give you more than 20% interest, thats huge!|
|AVERAGE RETURN: 18%||INVESTED AMOUNT: € 26 323 000|
|NUMBER OF INVESTORS: 10 800||INTEREST PAID OUT: € 1 800 000|
|BONUS: 0.5%||READ MY ENVESTIO REVIEW|
|BUY BACK GUARANTEE: YES|
|Crowdestor is a platform with P2P loans targeted to companies and Real estate developments. They don’t handle private P2P loans as of now. Projects listed in the last months have been at between 11-16% which is good compared to other platforms.|
|AVERAGE RETURN: 14%||LAUNCHED: 2018|
|PROJECT RANGE: € 20 000 to € 1 000 000||INVESTORS FROM EUROPE|
|AUTO INVEST: NO||REGISTERD IN RIGA|
|BUY BACK FUND STARTED IN 2019||READ MY CROWDESTOR REVIEW|
How P2P lending works
P2P lending or Peer to Peer lending like it’s called has been growing fast over the last 10 years. These P2P platforms works like a marketplace where they match investors with borrowers looking for either a private or business loan. In some platforms, the platform itself is the one making the credit assessment of the borrower before its approved like it is on Envestio. At Envestio they only present loans towards companies they vetted and see that the projects have a good chance of being profitable.
In other platforms they work together with other credit companies ( loan originators ) that does this before they post the loans on these platforms, like you have on Mintos that is one of the biggest sites in P2P for private loans in EU. The Loan originators goes through a checklist at the platforms so they can see that everything is going okay and that they keep to the criterias set by the platform to be able to post loans for the investors.
This is a new way for both private persons and companies to borrow money in other ways than from a bank or a close friend. Instead of lending it through a bank which is the common way and sometimes wont let you borrow, these crowdfunding and peer to peer lending sites can give you the loan.
And for you as an investor you’re able to get the interest on interest effect that is much higher than what you would get from your normal savings account. This would add up to a big difference over a few years which is great.
Which is the best P2P Platform?
There is no good answer to this because it all depends on what you are looking for.
I could say the best P2P platforms is the biggest once but that might not be true for your own criteria. Usually the biggest platforms will have the safetynet of being well known and also operating for a good time which is showing stability. On the other hand these platforms might have lower interest rates for investors then smaller platforms that also is doing good. Or they just have another focus area like private or company loans. All these P2P platforms I have listed on this page are good choices for now since the industry is growing and all of them are showing good numbers and gains.
A good example is the difference between the platforms of Mintos and Envestio.
Mintos with a huge platform in EU with average interest on 12-13% for EU loans with buyback safety. They have huge amount of loans to invest in and many different types of loans like private loans, short term loans and many more categories.
Envestio a smaller platform that only focus on bigger loans towards companies and projects. There average interest rates for investors is at 17-18% sometimes also over 20%. They post around 10 projects every month so not even close to Mintos that have hundreds of thousands of loans. Since they have two different approaches to their concepts and loans this is understandable.
How to start with P2P lending?
This is very easy at most of the P2P platforms. You sign up to their platforms through some simple steps filling in name, address, number, email and so on. Then you have to activate it through an email you get.
It’s only two things left before you can start investing. Making a deposit which usually is through bank transfer and when the money is on the platform you have to pick the loans you want to invest in. You are now live and earning interest 🙂
I would recommend to send in the verification documents they ask for at the peer to peer lending platforms. This is usually proof of address and passport so that you have everything finished for the day you want to make a withdrawal. This is something every platform has because of the money laundry laws in EU.
Do you have to pay TAX on P2P income?
Interest recived and profits from Peer to Peer lending is considered as normal income in most countries today in EU. If you do it as a private person or Company doesn’t matter but there can be some differences depending on which countries you pay taxes to in these 2 options. It’s always good to contact an accountant to check the rules around this for your country.
How will you know what tax to pay?
Almost all P2P platforms have a section in your account where you can download the numbers and tax rapport for the period you need and from that rapport you will see how much you earned and on what sum you should pay taxes on. This documents is usually very simple but understandable so most people can read them and know what to do.
Some countries even let you earn up to a certain amount before you will need to pay any tax on the gains you made from P2P lending. So it’s important to check this out yourself where you live so you get it correct.
The tax can be from 0% up to your normal income taxation depending on where you live and what you earn.
I moved to Cyprus some time ago and since I’m an EU citizen I can make these investments privately and get down to 0% tax on the earnings for the first 17 years. Other countries like Portugal have a similar system if your from EU and moved there. Portugal lets you off with 0% tax on capital income made outside Portugal for the first 10 years.
Then we have other countries like the UK. I heard that depending on how much your earning you can have to pay up to 45% in taxes on this income depending on what your earnings are per year.
Most of the countries tax the income from P2P like normal income and percentages, it’s like any other investment you make.
So you see It all depends on your situation and where you live.
Become the “Bank”
With Peer to Peer lending if you are an investor not a borrower, you can be like a “bank” and collect interest from the loans you invest in through these platforms. People and companies can jump in and take the risk involved and get the rewards if everything goes as planned.
Most platforms also have some extra layers of protection for you as an investor. Some platforms offer Buyback option where if the borrowers don’t pay in time the platforms or the loan originators will step in to buy the loan back for you with the interest up to the day its bought back. Now this puts the risk on the Loan originator or Platforms so you don’t have to worry about every single borrower. The buyback protection can be different on these platforms so always check it before so you know.
Diversify through more than one platform
When investing in anything, it’s good to spread it out on more than one platform and investment type. Having all the money in one basket is never optimal for any investor so to spread the risk between atleast 2-3 platforms would be smart. This is not so important if you already are invested in other things like stocks, real estate, gold and want to test P2P out.
Same goes for what you invest in on the platforms. try and pick different borrowers and also type of loans like towards property, some in company loans and also some private loans. It’s better with many small loans in different categories than all the money in one loan.
Is Peer to Peer lending safe?
P2P lending is something that is getting more and more attraction these days. We have new platforms opening almost every month. These P2P lending platforms usually work together with Loan originators ( credit institutes) that have to follow certain criteria so that the loans can be posted for investors to participate in.
I would say P2P lending comes with a small risk depending on how you pick the loans you invest in. But there is still always a risk involved when investing money in anything, this is important to remember. If you invest in P2P platform in Europe they all have to follow EU laws and AML ( Anti Money Laundering) criterias so that part is as safe it can be.
How to minimize the risk with Peer to Peer lending ?
First do your own research before investing in one of the P2P platforms. Is it a well known platform? Can you find others that have made reviews and showing results over a period of time? These things are good to know before jumping in as an investor.
* Try and see if you can find out how the platform is doing financially with yearly reports and so on. Also Trustpilot can be a good place to read quick reviews and what people think of them.. Check for bloggers and others in the P2P community what they say, this is a good way to find out how they do it and what to expect.
When you invest at these platforms always try and go for loans with some kind of Buyback guarantee so that the risk gets taken away from the single borrower and is on the Loan originators and platforms.
* People can for some reason not pay their loans sometimes, so now you don’t have to think about the individual. Better to trust that the Platform or Loan originators have money.
Don’t put all the money in one loan or loan originator to minimize the risk further.
Example: If you have 1000 Euro you want to invest. Don’t put all 1000 Euro in one loan or loan originator.
* I would have invested 10 Euros in 100 different loans spread over many different loan originators or platforms so that if one of the loan originators goes out of business and cant fullfill the buyback guarantee it will not effect you so negatively.
How P2P platforms make their money?
These Peer to peer lending platforms is like a middleman that takes a cut on top of the interest you are paid. In most cases, the platforms can take a fee from the company or person that wants to post loans to be funded in on their platform to start with. Then they will also have a higher interest rate to the borrower then the interest you are given as an investor so they get a small cut there too.
You find a loan on one P2P platform to invest in that will give you 13% interest over a 1 year period. Then the cost for the borrower is usually 1-10% higher than this and that will go straight to the platform and loan originators to cover expenses and other things while you still get your 13%.