A New Asset Class for the Bravest Investors

In recent years, investors have to deal with low-interest rates. This translates into fewer and fewer profitable investment opportunities.

A new asset, peer to peer lending, has made its way into this ecosystem. Peer to peer lending is extremely risky but also very profitable. Bondora is one of the oldest and most famous peer to peer lending platforms in Europe.

Let’s proceed in order to understand more about this platform.

Bondora How does it work?

Bondora is a Peer to Peer Lending platform born in 2009 in Estonia immediately after the financial markets crisis from an idea of Partel Tomberg, who is still the CEO of the company today.

On the Bondora Home Page you can read some data and information about the platform.

100,000 people have already invested more than 350 million Euros. With Bondora you become the bank, you lend money to others. And you can invest automatically with a minimum of 1 € and use a platform that has decades of documented experience in peer to peer lending.

For the moment I would like to dwell for a moment on the statement “you become the bank”, because P2P Lending (literally peer to peer lending, also called social lending) is just that, a loan between private individuals.

In fact, Bondora is therefore a platform that connects investors who will lend money and individuals who need a loan or financing.

Where is Bondora?

Currently Bondora allows you to apply for loans through the platform to 3 different countries:

  • Estonia
  • Finland
  • Spain

Bondora is a platform that uses a credit analytics system developed by the platform itself.

Investing in Bondora Loans

The platform focuses on unsecured consumer loans with amounts ranging from €500.00 to €10,000 with a duration between 3 and 60 months.

Within Bondora works a team of 60 people with different skills ranging from consumer credit to retail banking, from marketing to asset management.

Bondora is committed to providing borrowers, i.e. loan applicants, with fast and easy user experience with transparent fees and costs, focusing on medium-income consumers who need medium-term financing and who cannot obtain it from banks or financial institutions because of:

  • Regulatory restrictions
  • Asset restrictions
  • Technical issues

The applicant of the loans is mostly young people who apply for micro-loans (the average indicated is about € 2,000) and of these loan applicants about 30% show delays in payment (19% of the total amount, more than 6 months late).

Precisely for this reason, this type of credit is defined as “risky credits”. Therefore that investing in Bondora is risky.

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Bondora Risks: What are they?

Actually, it is Bondora itself that highlights the risks associated with investing in peer to peer lending and in particular the risks associated with those who choose to invest with Bondora:

  • Insufficient financing
  • Non-payment by borrowers
  • Risk of fraud
  • Death of a borrower
  • Risks associated with the recovery of outstanding debts
  • Platform failure

Indeed, we must bear in mind that we are talking about investments, and that any type of investment involves a certain level of risk.

Usually, the higher the potential return, the greater the risk of investing the money.

That said, we must talk about the many positive reviews of Bondora that can be read on Trustpilot, one of the most popular online review sites.

On Trustpilot, there are in fact over 7000 reviews that give a score of 4.5 stars out of 5 to Bondora.

79% of the users, in practice, said that the platform is a valid peer to peer lending platform to diversify investments with a good ratio between profit and risk.

The platform’s strengths are most appreciated by users:

  • The liquidity of the funds invested: you can withdraw the money invested at any time.
  • Those who register in Bondora and make their deposit can at any time make a withdrawal of what they have invested and will receive a transfer directly to their current account (for each withdrawal there is a small fee of 1.00 €).
  • The ease of use of the platform: extremely intuitive, it guides the user step by step in its use.
  • The site is translated into 24 languages.

The Go & Grow Plan

The go & grow is the most widely used plan that allows you to earn money automatically by simplifying the investment process.

The investor will simply have to deposit the amount he wants to invest and wait for it to grow (clearly, as said several times, there are no guarantees on the return or growth of the invested capital).

Do not underestimate the possibility of investing from a minimum of 1.00 € per single loan, a factor that clearly allows you to diversify your investment to the maximum trying to minimize the risks associated with this type of investment.

Bondora Go & Grow How Does It Work?

Bondora Go & Grow is the tool designed for those who have no experience in peer to peer lending and for those who want to minimize their risk profile.

The Go & Grow Plan allows you to always have the capital invested available: by choosing this investment plan investors can withdraw the invested capital at any time.

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This method is the most used on the platform and is the one defined as the simplest and most reliable, with most acceptable level of risk for the investor.

Portfolio Pro and Portfolio Manager are the other two options of Bondora.

The Portfolio Manager is more suitable for beginners and for those who have no financial skills or knowledge. It allows you to buy loans that correspond to the risk/return strategy chosen by the investor (all you have to do is simply answer the questions to indicate your preferences and your risk appetite).

The PRO Portfolio, on the other hand, is designed for the most experienced people who want to have more control over their investments (in this case the return is variable and the risk is high): also in this case you can set a series of investment parameters and perhaps choose the rating of the loans you want to invest in.

Is it risky to invest in Bondora?

Of course it is.

Although it is a simple and secure platform that counts a lot of investors, there are no guarantees on the investments made and the platform does not offer any guarantees on loans.

What are the benefits?

However, there are also potential benefits from using the platform, for those who want to invest in peer to peer lending that are:

  • The transparency and availability of historical data within the platform
  • Bondora’s presence on the market since 2009
  • The user interface is extremely intuitive
  • The large amount of loans available
  • The ability to customize or automate your investment

The negative sides instead are the absence of manual investment, the higher risks linked to higher interest rates, the lack of a loan repurchase guarantee (i.e. the buyback guarantee offered by the famous P2P Mintos).

It is, however, a platform designed for those who want to invest in the long term, with a time horizon of  5 – 10 years.

Johnny Thompson

Johnny Thompson is a senior reporter for Generator Research in Los Angeles, reporting on technology, business, finances, and more. He previously worked as a reporter for the Wall Street Journal and got his start at newspapers in New York, Connecticut, and Massachusetts.

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