Loan Platforms Roundup: May 2019
Review of recent trends and my current impressions of the loan platforms that I use
Sadly, I must open this month’s report with news of the collapse of British real estate platform Lendy. I’m still contemplating whether to publish a separate post with my 2 cents on the matter, or let others do the talking. For now I’ll say it’s a worrisome event for lenders, but I don’t see an immediate danger for “our” platforms.
Table of Contents
My Distribution and Profit
After hitting an all-time high, the available loan volume is finally starting to stabilise. So far interest rates remain extremely high, making Mintos even more attractive than usual compared to other well-established platforms.
While I enjoy the profits, I continue to worry about the high APR charged to borrowers. Aside from the moral aspect, one can’t ignore the regulatory shift against high interest rates. Stating July, Russia will decrease the max daily rate from 1.5% to 1%, and Latvia will cap the annual rate at 25%. Still, Banknote, Mogo, Creamfinance, Bino and Metrokredit continue to charge higher interests. I really hope that originators are planning for the day when interest restrictions come in to effect.
In other news, Mintos has launched an “Ambassador Program” for influential users – and I’ve been invited! Aside from a slightly higher bonus for myself and my invitees, I will gain early access to new features, and priority support.
If you decide to join Mintos, I would appreciate it if you use my affiliate signup link. You will get a bonus for investments made within the first 2 weeks. I will also be rewarded.
First, I’m back to 0% late loans. Second, I talked to Grupeer‘s customer service about the need to make the platform more detailed and transparent – and have good news! They are aware of the issue, and working on the following features – some of which will be added in the next few weeks:
- Status indicator for each loan
- Display of the distribution among loan originators and loan statuses
- Loan originator pages, showing additional info and financial data
- List of Grupeer‘s team members
Thirdly, Grupeer will hold three campaigns throughout June:
- 1% cashback on PlanetaCash loans
- 1% cashback on direct Finsputnik Platforma loans (where Finsputnik acts as the end borrower, not as a loan originator to some other borrower)
- 1% cashback on any sum beyond € 5000 invested in a single development project (Note: Investing over € 5000 in a single loan is dangerous)
I hope to see these campaigns draw in more investors and boost cash flow, especially into slowly-funded development projects.
Despite my criticism, I have to admit that Fast Invest is working like clockwork. The max interest rate for Euro loans seems to have settled on 13%, and such loans were available all through the month.
Their refusal to accept investors from certain countries indicates a problem with regulations, and they still have huge gaps to fill in terms of transparency. But they may have started taking small positive steps by reporting last months’ active (€20m) and cumulative (€73m) investment volume. They also joined the Copenhagen FinTech Lab and the European Crowdfunding Network, adding to their existing membership of the Spanish Fintech e Insurtech association.
I’m not sure how these memberships benefit the company, but at least they increase its visibility. It’s interesting to note that these organisations are located in Denmark and Spain – where Fast Invest get most of their loans. This indicates a strong link between FI and its loan originators, as we have previously assumed.
I was pleasantly surprised to receive €10 referral income from FI this month (included in the Deposit/Withdrawal column of my chart). Thank you!
Envestio is still my top performer (we’ll get to Lenndy in a moment), and I was happy to see 3 new borrowers on the platform this month.
On the other hand, I’m still bothered by the repeated loans taken by their regular borrowers. I see business loans as a temporary means to help businesses reach self-sufficiency, or at least become stable enough to get a low-interest bank loan. When the same few borrowers keep taking 16-21% interest loans every few months, I can’t help but feel that something is flawed in their business model.
Envestio continues to rely heavily on those regular borrowers. Even the platform itself hasn’t changed at all since I joined in August. Compared to ever-changing platforms like Mintos and Grupeer, Envestio seems stuck in place. However, with the high interest rates, perfect loan performance, and impressive financials – it’s still a good secondary investment platform.
Many of my late loans have been repaid, driving the monthly gain through the roof. Since half the gain is attributable to last month, the real figure isn’t as impressive. My XIRR since joining the platform in February is 9.08% instead of the expected 12% – but I expect it to rise as more late loans are repaid.
I’m very ambivalent about Lenndy. The ratio of late loans is staggering, but none of my loans has actually defaulted. If that’s the usual scenario, then income is only delayed, not lost, and loan originators are not in as much risk as I’d feared. Still, I wish I understood why Lenndy‘s loans behave so differently from anything I see on other platforms.
One of my expected repayments was only partially made by the borrower. I didn’t like that, so I sold the loan on the secondary marketplace.
It was interesting to see how investors treated different projects published on Crowdestate this month. Projects offering 15-19% interest were funded very quickly, with little regard to risk. Projects offering 11-13% interest struggled to reach funding.
To me it shows that investors are willing to take higher risk if it means significantly higher returns, but when returns are on par with other platforms, they stop and evaluate the risk thoroughly.
Personally, many of Crowdestate‘s projects feel a bit too speculative to me: The few % of extra profit (compared to more traditional real-estate loans) don’t always seem to justify this risk. So I haven’t made new investments this month.
I’ve been eyeing EstateGuru for quite some time as an option for solidifying my portfolio. Their returns are slightly lower than other Baltic platforms, but their loans are more conservative, and are all covered by mortgage. The platform has a solid track record and offers excellent transparency.
I’m bothered by two things. First, for relatively conservative real estate loans, the amount of late and default loans is a bit disappointing:
Of course, that’s what mortgage is for, and some defaults were already recovered successfully. But if they pile up, things can get out of hand, as we’ve sadly seen this month. So far it does not seem to be the case with EstateGuru, I just hope things won’t change.
The other issue is that as of 2017, the platform hasn’t reached profitability. Their 2018 report is due this June; I’m waiting to read it before I start investing. Any thoughts from you guys?