The first time I heard about Peer to Peer (P2P) was from a financial blog that I follow with very much interest (laurentiumihai.ro). If I recall the title was something “What are Peer-to-Peer loans? Loans from person to person“.
Normally, with a title like that, I was immediately hooked on the subject and my first impression was that they are sort of crowdfunding for different kinds of investments, taken by different persons.
Imagine when I found that you can invest in these loans, and act as a bank. I was so thrilled that I got heated on this idea for days.
The fastest description, I can think about, on how the platforms (or brokers) you use to fund in these types of loans are written in the following lines. There are multiple loan brokers in some countries (let’s say Romania) and there are persons that need to take credit for a business, an investment, a car, or for different needs. They proceed with contacting one of those brokers (where they settle the conditions, like deciding the interest rate) and sign a contract. Then the broker approves the loan and gives the credit. The next step is the broker signaling the need for a certain sum on the P2P platforms (let’s say the broker contributes 5% of the sum and the 95% came from the platforms). The platform acts as a crowdfunding organization, raising the money from different and multiple investors (like me, like you) and funds the loan broker.
How do you make money? Well, that is simple, as we are talking about a given credit with interest, each time the loan owner (the person who took the credit) pays his monthly rate (composed of principal and interest), you get your share.
Of course there are multiple conditions that apply between the loan originator and the P2P platform, contracts are signed, then these contracts are replicated for each investor that decides to contribute to the loan and so on. From here the idea that you act as a bank, and don’t forget we are getting interest from it!
Now there are multiple financial blogs out there on the market and tons of explanations on how exactly the Peer to Peer market works. I strongly advise you to consult as many as you can before deciding to start investing in this industry.
The first week!
The first deposit we made was of 50EUR on the magical date of 08.03.2018. After spending multiple hours researching loans that were ‘safe’ I’ve come up with the idea to invest in developed(in my opinion) countries. With this decision in mind, I am going to split the money in 5 x 10EUR loans in Danemark and Norvegia. I was so proud of myself. So proud I checked the platform each day (twice/trice) per day for the next following weeks.
After two weeks on 23.03.2018, I decided that this is a good investment asset to build upon it and added 50EUR more. The first payoff was on the date of 31.03.2018 in the form of 0.03EUR.
After exactly 6 months since the beginning we have a deposit of 350EUR and some cents revived by affiliate campaigns. We have 8 EUR received till now from interests and the estimated annual return of our investments is 11.4% (and that’s a good return for an investment). I found out that some loans are paid back under 30 days and we get 0 return on them. It is a bit of a blow-off, but I can’t be upset about this as it’s a common practice to borrow some money you need now (to cover something fast) and you know you will be able to pay it back soon.
Our funds are in only one platform and that one being Mintos. I chose the platform following the recommendation from the previously mentioned financial blog and my conducted research at that current moment. What I fancy about this platform are the affiliate campaigns (where you get a few extra cents for selecting loans from that loan originator) and the auto-invest settings.
In fact, these auto-invest settings made me realize that if I configure a good investment strategy, I can set and forget, come back next week to see the status of the loans. And this is exactly what I am doing now, well minus the part of checking each week (still in the once per day phase).
There are multiple platforms existing, each one with his own benefits and at a bigger search you will find diversification strategies, how to gain more from interest, how to choose loans, etc.
My annual goal is to have 500EUR invested in Mintos and we are 150E shy, but loads of time to reach it. I am not interested in a high return, because we deposit the money during a period of 6 months so it can’t satisfy the 11.4% return on 500E. But I am thinking that next year it will yield the 50 and something euro to reach the target.
My biggest concert is not the late payments or the loans that are closed without interest. No my concern that this industry did not pass the test of time (during an economic crisis and it has been 10 years since the last one). But set and forget!
Overall, I am extremely happy with choosing this type of investment, as I see it as a medium risk medium return asset.
Thank you for reading this!
Disclaimer: I am not a financial consultant, all the information you find here are my decisions, I taken in that moment, on my own analysis. I am open to any type of discussion about money. If you want to replicate my portfolio take into consideration that it is your money.