p2p lending corona

I hope you’re all safe and healthy and finding ways to stay positive and enjoy life while large parts of the world are currently in shutdown because of the coronavirus.

Please excuse me for posting the written article to last Sunday’s video with such a long delay. At least this post now contains more updates as a result.

A lot of you asked me how I feel about P2P lending right now and if I changed my strategy. So that’s exactly what I want to discuss today, in addition to how platforms and loan originators are responding to the crisis.

Please keep in mind, that as usual, all of this is just my own opinion as an individual investor and you should always decide for yourself how you allocate your money.

P2P Lending for Diversification

Let me start by answering the most important question you’ve asked me over the past few days. No, I’m not withdrawing money from my investments in P2P lending and I’m glad that there is little correlation with stocks.

While my Vanguard FTSE All-World ETF has crashed and dropped around 30% over the past month as the outbreak worsened, the P2P platforms I’m invested in have kept generating cashflow. So right now, I’m glad to have a somewhat diversified portfolio.

Building a more solid P2P Portfolio

Even though I’m not withdrawing money from P2P lending as a whole, I did put some thought into how I want my money to be allocated, to try and limit the risk I’m exposed to on each platform.

ExploreP2P recently published an excellent article on the topic, which I want to discuss with you first, before we take a look at my measures.

Coronavirus – how to build a solid P2P portfolio that minimises risks

Let’s start with a direct quote from the article:

… the biggest alternatives to P2P loans are either highly volatile, or offer no returns. We think this type of market environment can actually make P2P loans one of the best investment options available right now. Even with the uncertainties ahead, it should be possible to generate positive returns from P2P, without the downside risks of equities.

According to them, these are the loans that currently carry the most risk and the loans that should out-perform in this market environment:

Likely Worse:

  • Loans to small businesses and people that are self-employed. Just imagine if you’re running a cafe or hotel and you’ve had to shut down completely.
  • Loans secured by land, as land prices are more volatile than real-estate prices
  • Early-stage development projects, as the virus will likely impact construction and cause delays and it could take more time to sell the properties
  • Loans issued by weak loan originators, meaning loan originators that are very young, maybe aren’t even profitable yet and that likely don’t have enough reserves to cover an increase in loan defaults, for example from some of their borrowers losing their jobs.

Likely Better:

  • Car-loans, meaning loans that are backed by vehicles. Several loan originators like Mogo or Wowwo offer these on Mintos for example.
  • Real-estate loans, meaning loans that are secured by properties. The lower the loan-to-value, the better. In the current environment, residential real-estate also seems like a safer bet than office space for example.
  • Loans with a buyback guarantee by profitable, strong loan originators with more capital. These loan originators are likely better prepared to deal with an increase in loan defaults. Some of them, like for example CreditStar on Lendermarket and Mintos as well as Bondora have been through the last financial crisis already.
  • Loans in less-affected countries. Loans in less affected countries or in countries that are able to get this crisis under control more quickly might perform better. However, to me this part is a bit tricky and involves a lot of guessing. Since I can’t see into the future, I’m simply trying to stay diversified over several different countries.

All in all, I agree with their article on the topic and it’s pretty much exactly what I’m doing as well with my own P2P portfolio. I’m trying to focus my investments as much as possible around transparent, profitable loan originators with a good track record that in my view, are more likely to make it through a crisis.

Let’s go over some platforms, starting with my biggest investment.

Mintos

Over the past two weeks, I noticed an increase in late loans and pending payments on Mintos, which to me is not surprising, considering the unprecedented situation we’re currently in worldwide.

I made some changes to my Auto Invest on Mintos recently:

  • I used the ratings on ExploreP2P as a reference
  • Loan originators with a score of 55+
  • I excluded Dozarplati (long grace period) and Finko, since Varks (Finko Armenia) just had its license revoked
  • Like before, I only selected loans with a buyback guarantee
  • Interest rate: 16%+
  • Duration: 1-54 months (to also include longer loans by Creditstar)
  • Investment in one loan: 10€-50€

These are just my settings right now, of course it’s completely up to you how you set yours, which loan originators you exclude etc.

You can do the same for the secondary market, which currently offers some substantial discounts as a lot of investors started panic-selling since the Covid-19 outbreak.

Just pay attention not to only look at the YTM (yield to maturity). The YTM only tells you the yield until the planned end of the loan, but the yield will be much lower if for example, the loan is up to 60 days late.

So don’t only focus on the YTM, but also set a minimum interest rate that you wouldn’t mind receiving also in case of delay or buyback.

How Mintos is reacting to the crisis:

Iuvo Group

I haven’t noticed any difference in my loan performance on Iuvo Group over the past weeks and I haven’t changed anything in my Auto Invest.

Most of my money is invested in Romanian loans by the loan originator iCredit, followed by Bulgarian loans by EasyCredit. Both of them were profitable according to their past financial statements on Iuvo’s loan originator list.

The Iuvo Group platform as well as both loan originators I mentioned are owned by the Management Financial Group. The group was founded by Easy Asset Management, which started with EasyCredit in Bulgaria back in 2005.

That means they were around before the last financial crisis in 2008-09. As a result, the Management Financial Group and the loan originators it owns might be better prepared when it comes to dealing with a crisis than other, newer loan originators with less experience and financial reserves.

How Iuvo Group is reacting to the crisis:

Update by Iuvo: The status of our originators in the pandemic crisis

Lendermarket

I noticed an increase in late loans on Lendermarket. Once again, considering the situation we’re in, that didn’t come as a surprise to me.

Nonetheless, I’m having zero issues with their buyback guarantee after 60 days, which also includes interest payments for the late period.

Lendermarket recently increased the interest rates to 14% per year, so the only change I’ve made is to change my Auto Invest to invest into loans with an interest rate of 14% or more.

lendermarket auto invest new

In case you’re on Lendermarket as well, make sure you change your Auto Invest to the higher interest rate, so it doesn’t pick up older loans at 12% interest per year.

Apart from that, Lendermarket is offering a 2% bonus for new deposits until April 30th for all investors. After asking, the platform confirmed that the bonus will be in addition to the 1% cashback after 60 days, which is still valid when signing up via this link.

Lendermarket only offers loans by Creditstar, which was founded back in 2006. The Creditstar Group has been profitable for over 7 years and has the advantage of having made it through the last financial crisis.

How Creditstar and Lendermarket are reacting to the crisis:

Lendermarket response

Grupeer

My issue with Grupeer is that we can’t see numbers of their loan originators, except the ones that are also on Mintos and Viventor (where the numbers are available).

I stopped my Auto Invest recently and was planning to move the funds to other platforms. If you want to know the reasons why, make sure you check out my last monthly update. I’m still waiting for my first withdrawal (March 20th).

Grupeer’s official response:

The second statement gave me zero confidence in the platform.

It also looks like 3 Russian Loan Originators were founded in September 2019, possibly by the same person, shortly before being added to Grupeer…

Seriously, can this year get any worse? I’m hoping for the best, but I’ll keep you updated either way… I’ll also put together a separate post with all the information investors have collected at the moment.

Meanwhile, on Friday morning, as I was trying to figure out what’s going on, I redirected all my Grupeer links to a warning to hold off from investing on the platform right now.

So please wait out whatever is going on right now before investing/re-investing on the platform.

Swaper

I reached out to Swaper for their financial statements, since they’re sadly not publicly available. Here was their response:

Swaper finished the year 2017 with a 237 939 EUR loss, 2018 with 127 528 EUR net profit and according to unrevised data of the year 2019, the result is 361 998 EUR net profit. For now, we’re waiting for the year 2019 to be audited and then we will publish the official financial statements. Once that happens, we will inform all our partners and investors.

I’m glad to now have a bit more numbers than I had before, but I would prefer to see the audited financial statements myself as a PDF and I hope those are coming soon. I will keep you informed when that happens!

Until then, in my mind Swaper is currently the riskiest platform in my portfolio, next to Grupeer.

How Swaper is reacting to the crisis:

swaper response

I also reached out to my friend Bernhard, who has a very large account on Swaper and is in close contact with the Wandoo Finance Group CEO, Iveta Bruvele. He still has a lot of trust in Iveta and the platform and has not reduced his account size.

The only change I’ve made so far, is to increase the minimum interest rate in my Auto Invest from 12 to 14%, due to the 2% interest increase on Swaper.

Bondora

Bondora has been profitable according to their last two financial statements and the platform is transparent about loan performance, which you can see on their statistics page.

Because of substantial increase in Go & Grow withdrawals, Bondora implemented partial withdrawals recently. The Go & Grow product was always planned to work this way, as there needs to be a balance between available cash for withdrawals and money that’s invested in loans, generating the returns.

Here is the text you’ll find on the Go & Grow page right now:

*Despite the uncertainty surrounding COVID-19, we continue to deliver on our promises in offering investors a return of up to 6.75%* p.a. If you still decide to withdraw the assets from your Go & Grow account, it will take us a little longer than usual to make the full payment. We’ll make partial payouts of your total withdrawal amount. This will ensure that the Go & Grow portfolio returns remain stable for you.

For a better explanation on what happens when there’s a large increase in withdrawals and how partial withdrawals work on Bondora Go & Grow, this video (starting at 39:08) could be helpful.

Personally, I haven’t changed anything on my Bondora Go & Grow account.

How Bondora is reacting to the crisis:

Crowdestor

Most of the loans on Crowdestor are for businesses, real estate development projects, concerts, restaurants and even hotels. Those are exactly the sectors that have been hit the hardest by the crisis, so this is the part of my portfolio that I’m the most worried about in the current environment.

The performance of most of my loans here will likely depend on how quickly affected countries are able to get through the crisis.

Could you have foreseen a situation like this, with many parts of the world in lock-down and world travel and tourism coming to a halt from one day to the next? Or can you think of anyone out there buying a newly renovated apartment right now?

I certainly can’t, which is a crazy thing to say compared to just one month ago.

How Crowdestor is reacting to the crisis:

So that means, that likely until the end of June 2020, we won’t see loan repayments by borrowers and we’re giving the businesses we invested in 3 months of extra breathing room in this extreme scenario.

Other well-known business loan platforms like October
 and LinkedFinance are following a similar approach.

EvoEstate

Here is how EvoEstate is reacting to the crisis:

Viainvest

Viainvest hasn’t released an official statement regarding the pandemic yet, but I’m confident in their ability to make it through the current situation.

All the loans on the platform are from the VIA SMS Group, which has been active in the lending sector since 2009 and has been profitable for many years in a row now.

Conclusion

I’ll be honest with you. This is definitely not a fun time to be an investor or even a personal finance blogger, for that matter. The whole world is closed down because of the pandemic and there has never been this much uncertainty in the market.

Now add to that everything that already happened in the beginning of the year, before the outbreak, and whatever the heck is going on with Grupeer at the moment (I’ll keep you updated) and I’m having a hard time staying positive right now. Nonetheless, I’m trying my best, as I know in my gut that this too shall pass.

I’m extremely lucky to have my amazing wife by my side. I can’t imagine going through this without her support. I hope you’re not alone either, in case you’re also quarantined at home right now.

Please take good care of yourself and your loved ones and stay safe out there. We’ll make it through this.

Video (March 22nd)

17 Comments

  1. Hi Angelo, thank you for your interesting post and video! Do you think we can say goodbye to our Grupeer investments? I unfortunately I have made the mistake to invest a considerable amount, last january, in this platform, that seemed to have a good reputation, despite not having a secondary market. Now I’m reading a lot of negative comments, and their communication definitely doesn’t help in reassuring. What could we do to prepare for a possible legal action, if it turns out there where illegal practices going on?

    1. Thank you! I sure as hell hope not, I’ve had enough of this years events already…

      Same here, I even met with them personally at their offices last year and the entire team left a good impression. And they have plenty of solid loan originators, that are also present on other platforms, on Grupeer. I only started getting more concerned this month, after this years events in the crowdlending space and after Alla’s weak, inconsistent replies to Bernhard’s interview questions.

      I’m actually already in contact with Guillermo, who is leading the case against Kuetzal & Envestio. We’ll be talking about possible options on Monday evening with a Latvian law firm, in case things don’t improve. I’ll keep you updated!

  2. Good post as always:)
    What is your thought on this pause in interest/principal repayments that is being forced in most banks/countries and also now starts to show in P2P platforms for 3 months or more while the pandemic is spreading and shutdowns of operations are happening all over the world?

    I think most of the platforms will start implementing this soon ( Grupeer, Mintos and many more when they realise the impact this is having. IF it’s not in control in a few months that is), not only the few platforms we see now already doing this ( NeoFinance, Crowdestor, linkedFinance, October)
    I think it’s the right thing to do, even if some investors will cry over it and have to wait, it’s better than the option of having mass defaults right?

  3. Looking at the Bondora numbers and graphs posted in the “P2P investment fellows” group, I wouldn’t be feeling to comfortable with my investment there now. Same goes for pretty much all the platforms and LOs, the last crisis was different sort of crisis and the P2P industry was a lot smaller. How that influences the risk now is hard to assess.

  4. Very very well written! I’m constantly following your progress. Even though it is a risky environment. Never has this been a good time to begin growing portfolios. Heck, we may even be able to buy up airlines for pennies on the dollar soon : ) Let’s hope things actually improve in the state of the investment world. To take advantage of these amazing rock bottom prices. It’s a great time to have cash.

  5. Ciao Angelo, yes please keep us updated, from what I read on multiple sources things are definitely not looking better. I would gladly join a legal action. It would be interesting to know, for now, what info can we produce, expecially now that the G website is still working.

  6. Not sure if it will help in case of a legal action. But as the website is still reachable, I have downloaded : Account Statement + My Investments (from the beginning of my subscription).
    There are proofs of what our investments were.

    Fingers crossed ! 🙂

  7. Angelo, as Bernhard was one big investor (and hence will suffer a huge loss), maybe you could tell us what Bernhard is planning to start as legal action ?
    We could maybe make a group action, in order to increase the pressure ?
    Keep us posted 🙂

    Centrino

  8. Their website is still online, are there any chances this is just a confusion? and panic caused by all the current situation? I do agree though, I stopped receiving payments on March 23rd, clearly.

  9. So which platform is next? Because the current situation will indeed affect every single P2P lending platform out there.

  10. P2P lending will be hit extremely hard by the COVID-19. It was already a very risky place (evidenced by the incredible amount of investor wipeouts). Whole industry is toxic waste. Stay in real equities people!

  11. Hi Angelo. Thanks for the nice and regular content.

    What tool or software do you use to track your portfolio performance across all then platforms? I was searching for some that were either free or cheap but could not find anything that integrated well with the P2P platforms. I always find it difficult to import data into them from a P2P platform every month. Do you also have this pain point? Any suggestions?
    I started developing a portfolio performance manager/tracker for my personal use but would love to get some feedback if others also have similar issues. And share the tracker with others as well.

  12. Hello, I stumbled on your post today and would be interested in any updates. I am specifically interested in VIAINVEST. I have a good chunk of money there. Your link to VIASMS financial statements takes me to early 2019. There is nothing since.

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