In this article I will step by step show you how I 7.500, - Euro in P2P lending invest and how well you can install this system in your asset allocation (if you have a larger portion of risk-taking with the hand luggage). I've always sparse and on a single platform namely Aux Money invested in P2P loans and Bodo, my investment Monkey advised me it expand a little to have a value system that correlates little with the equity markets.
Will braver.
To be honest, I bet he just suggested it to me because he wants to continue to invest at the weekend ;-)
Overview of P2P market
But there has developed strongly since then this area and there are many new options and platforms for investors, I decided to incorporate more me.
The market for P2P lending had in 2012 a volume of about 1.2 billion US dollars in 2015, the volume already $ 64 billion. So the market is growing very strongly and I will of course, as befits a rational capitalists also have my piece of the pie. (Source: Statista )
Helps me Lars Wrobbel, founder of the blog - Passive Income with P2P personal loans - which I already a book I wrote on this subject.
For those who do not know what P2P loans are, here again a short explanation:
P2P stands for peer-to-peer . Peer means as much as in German coequal , it is meant for P2P loans, so that two peer to complete two people together for a loan. Peter needs money, he did not for a new car and is ready for it to repay more than he gets. Max is willing to lend his money and get by if all goes well, a return in the form of interest from Peter.
Which now does not work over a kebab shop, but over P2P platforms where you can apply for a loan, but also in the credits, the other record, invest or finance them to obtain a return in the form of interest , As rational investors we are on the side that receives the return and not on, picks up the debt, we will, so to speak to a bank.
But after that I never want to go longer today, as I on this subject quite a bit of information on my channel have been published, but also in our book.
I will now invest in three of the largest platforms namely, Minto , Twino and Bondora . (Minto and Twino affiliate links)
The three platforms are in the P2P scene where Lars is very active, always highly praised, only Bondora there is something controversial opinions, but he has not had good experiences with all three. (There is the blog article also available as video:
How do I invest € 7,500 in loans P2P - P2P Minto, Bondora, Twino Tutorial
Step 1: The Registration & Payment
Before you can invest you have to register only once, of course. This works pretty simple. One need no post-identification process or other but can simply register his identity card number, address, the name and some additional information as an investor. The individual platforms are top of the blog post and link below this article.
If you have registered, you will receive an investors account into which you can transfer money from his checking account. I have done this before and now have on each of the three platforms 2500, - Euro deposits.
If the step of the registration and transfer is done, then you can already start its portfolio build.
Step 2: credit selection - Manual or Automatic?
The first way that one has is to invest directly in individual loans. It has for an overview of the various loans that you can invest in all three platforms.
There is a rating to each loan, there is a creditworthiness rating. This indicates how risky the respective credit is and how high is the chance to get back his money back at the end of the term, or how high the risk is. The ratings are not created by the platforms themselves but by independent financial service providers.
The rating system of Bondora:
Step 3: Which Rating? Risk / reward decision
This is similar as well as in bonds issued by governments or large companies that are rated by companies such as Standard and Poor's or Fitch, depending on the credit rating. But just as in bonds and the ratings are to enjoy at P2P lending with caution.
One should not think that loans with a top rating as A are rated not fail, indeed Lars's experience in Aux Money that more A loans have failed as loans with lower credit ratings. Of course, this also has a lot to do with coincidence, but shows that these ratings are not a guarantee, otherwise it would be no return.
Of course, the loans with lower credit ratings tend to have higher returns, but it still makes no sense only in very high-risk loans to invest, because there is a maximum return for loans, which can not exceed in any case.
So this is not like in the stock market, where you invest in Apple, for example, in 1980, and a return of a result of luck or an incredibly brilliant mind ca.3800% achieved.
wide diversification
Since you have no chance to achieve such horrendous returns with P2P loans, it does not matter how wide is diversified, it has a focus that can bring in the stock market sometimes high yields with at P2P loans no advantages. Therefore, you can and should diversify very wide at P2P lending.
In addition, the failure is with P2P loans more often than bankruptcies among companies, so there are no fluctuations, this one has quickly a realized loss, another reason therefore to diversify very wide.
Lars advises to weight each credit with about one percent in the depot, with me, that comes every 25 euros, I would invest on any platform 2.500 €.
Now briefly to the major differences that exist between the various platforms.
Differences between the platforms
In Bondora you learn a lot about the person who stands behind the credit, but less than the loan itself.
Minto has the most information about the loans. In Minto you get an overview of the financial situation of the company in the form of a somewhat simplified balance sheet for loans by companies, also gives various information on the credit itself. For other loans, such as loans for houses or cars, you get information about the value of securities, which are stored.
In Minto, there is a code that indicates what percentage of the loan is covered by the security lodged. The key figure is referred to as LTV, which means as much as credit to the value, the lower the LTV, the higher is the yield on the loan. (Loan-to-value)
What security is behind the loans can also be found at the information the credit.
So if you want to deal intensively with the individual loans, Minto has probably the best alternative.
Twino is pretty much the opposite of that, there are no credit ratings or other. This is because at Twino the whole system is slightly different structure, while there are differences in yields between the individual loans in the other two platforms, all loans have at Twino the same return.
This works by getting as investor guarantees repurchase of Twino, so if default occurs you get the money, plus interest, in which you had the credit in the depot at the time incurred. Thus, the investor has an equal risk with any investment and is rewarded with a constant rate of return that is currently at 12%.
The risk is at Twino no longer in default of the loan, but that Twino has no more money to loans, they should fail to redeem.
Especially for investors who do not want so much to deal with the individual loans in order Twino provides a good system.
Also in Minto, some loans have a buy-back guarantee, they are marked with a shield.
Another difference between Twino, Minto and Bondora that there are many short-term loans at Minto and Twino, some with maturities of only one month, so-called pay-day loans.
was what has always annoyed me at the time at Aux Money that often happens is that I have invested in loans, but these are then not come into existence because not enough Others have invested in the loan. The money came back into my account and I had always to seek new loans and invest the money again the effort.
That was annoying and time-consuming ...
Minto and Twino have found a solution to this problem. In Minto loans of so-called Darlehensanbahnern to be financed. These are companies that pre-finance the entire loan as an investor then you have the chance to participate in the already closed mortgages. The big advantage is that you are not dependent on other investors, you save the fact a lot of time and does not always have to look for new loans, as it is buying just the desired share of the pie (credit).
Twino itself is the loan originator, but actually makes no difference for us investors.
The loan originator are simultaneously at Minto and the companies that offer loans for some a buy-back guarantee.
This is actually one of the biggest differences between Minto and Twino, Twino makes the business on your own and not only the platform but also all the trappings. however, Minto only provides the platform and the loan originator to make the credit business.
Minto, incidentally, seven such Loan Originator, all who specialize in a particular credit area. For all interested here's a short list of loan originator:
ACEMA specializes in mortgages and is one of the leading non-bank companies in this field, the company has its headquarters in the Czech Republic and has been active of 2002. Last year, the company has provided more than 500 loans with a total of more than 14 million euros. In December 2015, the total assets of the company amounted to more than EUR 36 million and the profit from the core business was 4.4 million euros.
The Capitalia founded in 2007, specializes in the financing of corporate loans for small and medium enterprises.The company has been awarded for more than 10 million euros to about 500 different companies.
The Cream Finance founded in 2010, is a leading consumer credit company that is heavily involved in Fin-Tec range. The company primarily offers consumer credit in emerging economies. The company is in the following six countries actively Latvia, the Czech Republic, Poland, Georgia and Slovakia. Cream Finance has at its offices a total of 210 employees and provides about 60 million euros per year.
Debifo is the first factoring provider for small and medium enterprises in Lithuania. Factoring is a financial transaction in which we accept or Debifo as an investor the bills of small businesses. These are among the companies to which have the large corporations as customers. The big corporations often have very long periods of time in which they can pay off their bills as small businesses but often can be difficult to deal with these payment delays we come into play. We speak pay off the bills of large corporations, smaller businesses stay afloat and when they get paid, we get our money back plus interest.
Debifo awarded only since May 2015 over 1 million euros.
The Hipocredit founded in 2014 is one of the companies of the Minto group. The company has, however, also specialized in mortgage financing for both consumers and businesses. Hipocredit is very interesting in structure, namely it employs only five employees and relies very heavily on outsourcing.
Mano Unija is the largest credit institutions of Lithuania, it was founded in 1996 and is the oldest of the seven Darlehensanbahnern. To date MANO UNIJA has awarded over 356 corporate loans worth 12 million euros. The company specializes While on corporate loans but also provides mortgages, auto and consumer loans to
Mogo is one of the largest non-bank car loan providers and active in Estonia, Latvia, Lithuania and Georgia. Since its founding in 2012 Mogo has awarded a total of over 60 million euro loan and currently employs more than 200 employees.
Incidentally, only Mogo and Cream Finance buyback guarantees offer, but but the two they offer almost all loans.
In Minto, the buyback is the way, if a credit is 60 days in arrears, at Twino he will be repurchased after 30 days.
Bondora does not have a system to be financed in the credits, so you should, so far as one wants to select the loans individually funded to the measure Funded / Left and / Remain and pay attention to how long the financing still takes, which is just below next the category "financing Ends".
When a loan is funded already almost 100% and a little time is left, the financing is expected to come into existence. However, if the funding in a few hours of credit ends but only about 60% is financed, one should perhaps not choose this, because you may have to look for a loan again else afterwards. That's often happened to me before in Bondora since I as invest some time.
So far I have only talked about the opportunity to invest at the beginning of the term or the financing in loans. But there is also a further possibility, namely the secondary or secondary market at the platforms Bondora and Minto.
The secondary market
On the stock market we act as investors and 99% in the secondary market. If a corporation has its IPO or a bond issue, then the shares or bonds are still in the primary market. If you buy shares directly from the IPO, so you buy them on the primary market. Once the buyer bought the securities on the primary market to sell their securities back, then one speaks of a secondary market.
And when investors sell their securities? Just when they have lost confidence in a positive development and believe the shares are worth less than their current price.
It is the same with the P2P loans when buying the same for the financing, then you buy in the primary market. If loans but already have a while in default or investors need their money early, then they can their loans on the secondary market to sell at a discounted or sometimes even more expensive price.
In Minto there to the secondary market, the key figure Price / discount, it is below about how much cheaper percent of the loan or sometimes more expensive. Also stands whether and how long the loan is already in default.
When a loan is trading at a decent discount, but in the end still can not fail to improve its return on properly, but there is also an increased risk.
On the secondary market, there are many interesting offers, with which you can earn a great return. Anyone who is interested can times on the blog - P2P Anlage.de - Andreas drop by who has specialized in the secondary market trading and was able to obtain astronomical returns.
But one should be aware that this business demands a lot of time and you should never lose sight of the ROTI (Return on Time invested). In addition, any return will be in addition to the risk-free rate obtained by an element of risk into existence in this case.
For some of you, the secondary market is nevertheless but a good way, but in this article it is more a matter of going passively as possible to invest in P2P lending.
But I will not invest directly in the primary market still in the secondary market in individual loans. Instead, I will invest function using the auto-Invest, which offer all three providers.
Step 4: Building the Car Invests
This automatically invested in a broadly diversified portfolio of P2P loans besides, I can specify that the money is to be reinvested again and much more, but we'll get later.
For me the goal in the case of P2P lending is to achieve a truly passive income, which for me either now or means to have during the term of a lot of work with my three investments or deposits. There are no fees or other incurred.
I have now been occupied me for a while with the issue and found for me personally, I will provide no claims about what makes the borrower with my money. Whether to buy a car or his training is funded me relatively unimportant, I just want to return that I lend him my money.
Therefore, I can simply the work of credit choices left to a computer. It may also be that it is different with you, but that's the great thing about our time, everyone can choose what suits him.
Now we come to the practical part of this article, I will invest now in all three platforms my money with the help of auto-Invest function in Minto and Twino or the portfolio manager function in Bondora. Even if the names are different on the platforms, the principle is the same.
In Bondora that works most easily, you have basically three portfolio managers to choose from. A Conservative, a Balanced and progressives.
The expected return differs only minimally, so it really makes no big difference in the three. Interestingly, the balanced portfolio has a higher expected return than the Progressive.
Under this selection box you will find two graphics where you can see how the loans on the one hand by risk class and divided by country. Of course, as already mentioned, the risk estimates with caution, because why should loans from Estonia be safer than loans from Spain?
I have chosen for the balanced portfolio managers. After that, you just select it, confirm the Terms and Conditions and have all the money invested from the depot to the portfolio.
This works for Bondora So really very simple, which brings both advantages and disadvantages. Would I want, for example, a portion of my money in the conservative and invest in the balanced portfolio, then I would have to pay an extra create a new profile, because I can always invest in a single portfolio.
If I deposit new money is also invested immediately in the portfolio.
But Lars says he has therefore still not made any worse experiences or returns achieved as where you had more options for other platforms.
Bondora offers potential for all-passive investor who not possible wants to deal with his P2P Investments.
Next, I will invest in Minto, as I said fall for the car-Invest function in any of the platforms costs, which of course it can change again and again.
Minto is, for example, a very young company, when it noted at once that the strategy does not work out, and it may well happen retracts loss that eventually incur a charge to interest. But that's a normal surgical risk that one also has, if you put your money in a savings account.
To avoid having to always look on the platform if anything has changed or there are special offers, it may therefore be sensible simply the newsletter of the platforms to subscribe.
In Minto one finds when one is eigeloggt, is listed above a bar on the the category "Auto-Invest". In this category you can get a new car Invest portfolio set up what I will do now just. There are a lot more choices than Bondora.
This one has now select the option of how much you want to diversify, which runtime should have the credits, etc. Since the will but always explained on the pages themselves, I will not go into detail on each category.
One thing to keep in mind, it is not selected to strict criteria, since it could happen otherwise that the computer can not find enough loans that meet the criteria.
If you did that, you still need to click save, then you have to check the portfolio and the money is automatically invested. When changing your own needs once, you can also change the portfolio, but as I said you should always note the ROTI.
at Minto and also in Twino you can create many different portfolios, as required.
Finally, I'm going to invest my money in Twino. One drawback to Twino is perhaps for some, there is the platform only in English, while the other platforms each also have a German side.
In Twino creating works similar to Minto. Simply click into the category Car-Invest on the Create button. Then you come back to a form where you can specify various criteria again.
Almost finished ;-)
Here, the form is different to the terms not particularly from the form that you had to fill in Twino.
Then you can all easily store and the money is automatically invested.
The application itself has not even lasted a total of twenty minutes. While I have set up the other two portfolios, already 2,365 euros were invested in Bondora, and while I've set Twino my entire capital invested in Minto already.
In the category "My Investments" you can also get an overview of the loans in the auto-Investor has invested.
Now a few brief comments on P2P Investments in general.
Many investors have also therefore dissuaded from P2P Investments, because you have to specify the interest income in the tax return. Although this does not automatically as online brokers, but it's much easier than you might think at first.
Lars wrote in his last article exactly on the subject of taxes on P2P loans. It shows you exactly how you bring the whole quickly and without a lot of time on the stage.
Although I no longer invest in Aux Money is also due to a few reasons mentioned above, but especially because aux Money not invest allows me with my Spanish business account on the platform.
but I was not otherwise dissatisfied with Aux-Money and especially for beginners is the platform well suited to gain experience because you also get a bit closer contact with borrowers, increasing the confidence in the P2P business.
I have previously stayed talking about diversification, which makes but, especially if you have larger amounts of investment, not only between the loans but also between different providers sense.
Some investors only invest in a platform to have bad experiences and then condemn P2P lending in general. If you think so, however, you make two mistakes on the one hand, it does not mean that a school is bad just because a student remains seated. And secondly, the school system is not bad just because a school is bad.
As one has seen in this article, there are many differences between the platforms. Each has its advantages and disadvantages that fall more or less important always depending on the investor.
But basically P2P loans are a rational understandable investment, the principle of which has been around for centuries, but just in getting a modified form.