Here is my updated Lendermarket review, based on my own experience investing on the P2P platform for close to two years now.
As usual, I’m going to be fully transparent about the amount I invested, my returns so far and my account balance on Lendermarket.
The post also includes some questions I asked the platform. So whenever you see quotes throughout the review, that’s Omayra Roig, the business manager at Lendermarket, answering my question.
I hope you’ll find her answers useful as well.
Lendermarket – P2P Platform backed by Creditstar
As a result, the platform only offers loans originated by Creditstar’s own lending companies. In this case, I don’t see that as a bad thing though.
The Creditstar Group itself was founded in 2006 and has been offering financial services (loans) ever since. It currently operates in 8 countries all over Europe and has been profitable for over 8 years.
Creditstar has its business headquarters in Tallin (Estonia), in addition to offices in each country where they offer their financial services.
The Lendermarket platform itself is based in Ireland. I like having a bit more diversification as far as where platforms are based, that way I’m less affected by regulatory changes in one country (eg. Latvia or Estonia).
Why did you choose Ireland for Lendermarket?
Ireland met the regulative criteria that the business development team established while working through various countries. And additionally, what was very important to us – an English speaking environment. As our working language is English within the company, then we preferred to establish the business in the country, where we’ll be able to interact with the regulator directly in English. Ultimately the choice of establishing the business in Ireland came down to multiple deciding criteria.
Short-Term Loans with 14% Interest and a Buyback Guarantee
Lendermarket offers mostly short-term personal loans from Spain, Finland, The Czech Republic, Estonia, Poland, Sweden and Denmark.
Most of the loans on the platform currently have an interest rate of 14% per year. All of them come with a 60-day buyback guarantee. More on that later.
I noticed that the interest rate for Creditstar loans on Lendermarket is significantly higher than on Mintos.
In comparison, here are the yearly interest rates for Creditstar loans on Mintos (as of October 16th):
- Estonia: 10% (-5%)
- Finland: 10% (-4%)
For me, that was one more reason to invest into Creditstar loans here instead.
Why was Lendermarket created instead of offering more loans on Mintos?
The reason is very simple. We wanted to diversify Creditstar’s funding. Adding another source of investment helps maintain the stability of the Group.
What’s the advantage for an investor to invest in Credistar loans on Lendermarket vs. Mintos?
– Platform risk/exposure from the investors’ side – also good for diversification
– Currently, Lendermarket focuses only on loans originated by Creditstar’s operating entities, while Mintos has lots of originators. We’d like to think that we can provide better Investor Support and communications via Lendermarket, by being more focused on a single partner.
– The loans have a shorter term, which is highly appreciated by investors and higher interest.
The 60-day Buyback Guarantee
All loans on Lendermarket come with a 60-day buyback guarantee by the Creditstar Group. If a loan payment on Lendermarket is more than 60 days late, investors receive back all outstanding principal, plus accrued interest and late payment fees.
Additionally, on Mintos all Creditstar loans (except the ones from Estonia) have a 3 day grace period. Meaning that if one of these loans is paid back up to 3 days late on Mintos, you don’t receive interest for those 3 days as it’s within the “grace period”. If something like this happens regularly with short-term loans, it can have a significant impact on returns.
Luckily, there is no grace period on Lendermarket, giving it another edge (in addition to the higher interest rate), over buying Creditstar loans on the Mintos marketplace.
Still, what if…
Even with a buyback guarantee and solid financial statements by the Creditstar Group, I always like to ask this question:
What would happen in a worst-case scenario, in case of bankruptcy of Lendermarket or going one step further, of the Credistar Group? Would investors still have the claim to the loans and what would be the course of action in that case?
Regarding the theoretical circumstance of us having to shut down: For this matter, the Department of Justice and Equality of Ireland has in October 2018 granted an authorization to Lendermarket Limited to operate as a “Trust or Company Service Provider” in accordance with the provisions of the Criminal Justice (Money Laundering and Terrorist Financing Acts) 2010 and 2013. With a case reference of TCSP APP/1224/2018. According to the provisions, we hold our Investors’ funds in a trust account that will not be subordinated as assets in a bankruptcy.
Furthermore, according to the platform’s legal conditions, the Loan Originators will be obliged to make repayments directly to Investors, in case Lendermarket as a platform would cease to exist.
The default scenario of Creditstar Group in the foreseeable future is highly unlikely. However, if that were to somehow happen in theory, then yes, investors will still have claims to the loans that they invested in. In case of Creditstar Group’s default, there would still be a mechanism for Creditstar’s borrowers to repay for their obligations. And as the particular loans that Lendermarker’s investors invest into are pledged via Lendermarket to the investor, the flow of funds would be similar as in case of a regular business scenario.
What Needs to be Improved
While I’ve been highly satisfied with my experience as an investor on Lendermarket (more on that later), I do have two criticisms:
1. Secondary Market
Sadly, Lendermarket doesn’t have a secondary market yet. Thus, we’re currently unable to sell loans before the end of the loan term (eg. in case of an emergency). I’m hoping it will be added in the future.
Are you planning a secondary market?
As for the secondary market, at the moment we don’t have it in our pipeline, for that we’d need to see the supply-demand of it to analyze if it would be useful for the investors or rather it’d be too disruptive for the operations.
If like me, you’d also like Lendermarket add a secondary market to its platform, then it probably can’t hurt to reach out to them about it. The more demand they see for it from investors, the sooner it should be implemented.
2. Auditing Firm
While it’s great that Creditstar publishes its audited financial statements every year and that they’re profitable, the audits all the way up to 2019 were done by a very small auditing firm.
Luckily, Creditstar already confirmed that they switched to a so called “Big Four” auditing firm, KPMG, for their 2020 audit. It should be out any day now, and I’m hoping that it will put this issue to rest.
Until then, here are Creditstar’s latest (unaudited) results: Creditstar Group Interim Report Q2/2021
My Lendermarket Experience
I added Lendermarket to my P2P portfolio on November 21st, 2019. Close to two years later, I have 2.748€ invested and earned a total of 735€ so far.
According to Portfolio Performance, Lendermarket is currently the best performing platform in my p2p portfolio, with an internal rate of performance of 14,36% p.a.
You can find my exact monthly earnings in my regular income updates.
My Auto Invest Settings
Here’s how my Auto Invest is set up right now:
In case you’re wondering why I set the duration to 12 months maximum, that’s because I already have a large number of long-term loans from Estonia in my account and I want to make sure my portfolio is somewhat balanced.
I also have many short-term loans from Spain and Poland in my investments already, so they’re only bought by my second auto invest if other loans are not available.
This is what my first auto invest looks like in more detail:
Make sure the Total amount of investment is set higher than your deposit if you want the platform to automatically reinvest the interest payments you receive. I chose 75€ as Maximum investment per single loan. The minimum investment per loan is 10€.
Next, tick the box next to Reinvesting if you want the autoinvest to reinvest for you and enter the minimum interest rate (I set mine at 14% per year).
The remaining term is completely up to you, I set mine to a max. of 10 and 12 months respectively, since I already have plenty of long-term (>3 years) loans from Estonia in my account. I like having a mix of all durations.
It’s likely enough to just create a single auto invest for all countries and durations. But, if you want a bit more control over how your money is spread out, then I recommend creating several ones like I did.
As I mentioned, I’ve been very happy with my experience as an investor on Lendermarket after close to two years now. It is currently my best performing investment in P2P lending.
The platform enables me to invest into Creditstar loans at a higher interest rate than Mintos, which is why I only buy them here. Creditstar has always been one of my favorite loan originators on Mintos. Here is why:
- They were founded in 2006 and have made it through the financial crisis
- They are active in 8 countries all over Europe, providing some regional diversification
- They are transparent and share all of their financial statements: 2019 (audited); 2020-21 (not audited yet)
- The Creditstar Group has been profitable for over 8 years, which is important for the buyback obligation after 60 days, including outstanding interest for the entire period.
I also appreciate that the Auto Invest is reliable and as a result, I don’t have to spend any more time on my investment on the platform after setting it up once in the beginning. That’s something I’ve really come to value, as I already spend way too much time tracking all of my investments.
That being said, it’s not all rainbows and unicorns here either. Compared to many other large platforms, there is currently no secondary market and we’re still waiting for the latest audit by KPMG, which I’m hoping will be out soon.
How has your experience been on Lendermarket? Do you agree/disagree with my review?
If you’d like to support me and test out Lendermarket for yourself, you can…
- get 1% cashback on all of your investments in the first 60 days on Lendermarket via my link. The entire bonus is added to your account within 5 business days after the 60 days are over (this was mine).
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