Our pick of the best P2P loans
This post is part of a regular series where we highlight what we think are some of the best P2P loans available in the UK and Europe. These loans may have recently sold out. If they have, it is likely that very similar opportunities are available on each platform. Our goal is to highlight the types of opportunities that have been available on various platforms recently, and which types of loans offer the best (and worst) risk versus reward right now.
For this edition, we have attempted to select loans that either offer temporarily strong returns due to the market conditions caused by the Ukraine war, or provide an additional layer of downside protection.
Why we like it
Interest rate: 14%
Term: 36 months
Interest rates available on Mintos have increased significantly since we last ran out list of P2P picks. The reason is pretty obvious – uncertainty caused by the Ukraine war, as well as rising rates. This loan is from Delfin, who are one of our highest rated Mintos lenders. We don’t think rates as high as 14% will be available for too much longer from such a high quality lender. Some investors will be wary of Latvia’s geographic proximity to Russia, but these risks seem to be fading given Latvia’s NATO membership, the strong co-ordinated response of Western governments, and the growing difficulties being experienced by the Russian army in Ukraine.
Interest rate: 14.5%
Term: 30 months
asset backed loan
This is a good example of the loans that are available on P2P site HeavyFinance. HeavyFinance loans are interesting right now because they lend to farmers, most of who are experiencing rising incomes due to increasing prices for many agricultural products. This is due to inflation and supply disruptions caused by the Russian embargos. This loan is secured against a tractor and a loader with an LTV of 70%. The farm produces essential oils (a high margin crop) and was profitable in 2020.
Interest rate: 11%
Term: 24 Months
1st charge mortgage
LendSecured is another P2P site that is focusing on lending to European farmers. The number of loans listed on the site has been growing. We think loans like this one are very simple and offer an excellent return relative to the risk. The loan is to a farmer who is looking to expand by purchasing another nearby property. The property has a farmhouse in good condition, sheds and agricultural land. The valuation report is prepared by a well known firm with a good reputation. If you are interested in trying out some new P2P sites that offer solid returns with a lower risk profile, LendSecured is definitely worth considering.
Interest rate: 11%
Term: 12 months
2nd charge mortgage
Estateguru is now publishing a lot of new projects but we continue to think it is important to choose carefully. The risk profiles can vary a lot, even though interest rates are similar. Loans like this one remain our favourite – bridge loans secured on high quality residential real estate. Interest rates are now higher too – the last Estateguru we looked at with a similar profile had an 8% interest rate. Investors can now earn 11% due to market conditions. The borrower is a developer that has already repaid several loans on EstateGuru already. they are pledging their own house to raise funds. The loan is second rank, but the LTV is still low at 62%.
Interest rate: 10%
Term: 9 months
1ST CHARGE MORTGAGE
This loan is no longer available – it sold out within minutes. But we are still listing it here as an example of the types of loans we think are pretty interesting that are available at Max Crowdfund currently. The loan is to a developer who buys properties, undertakes some light refurbishment, and then sells them to social housing companies. A social housing company has already agreed to purchase this collateral property at a price 36% above the loan amount so there is a very low risk of investors losing money upon a default. If you are interested in further opportunities like this we recommend opening an account and reacting fast when loans go live.
Interest rate: 15%
Term: 24 months
Lendermarket offers loans from a lending company called Creditstar. Creditstar operates in many European countries and seems to be doing well – it announced (unaudited) profits of €7.1m for 2021 and have been growing strongly. All loans benefit from a group guarantee. We particularly like the loans from Spain currently. Why? Geographically it is located far from Russia and so therefore less likely to have disruptions from the Ukraine war. Secondly, we expect interest rates to fall in coming months for various reasons – so locking in an interest rate of 15% for 2 years is attractive.
And here are two loans we DON'T like....
Interest rate: 13%
Term: 9 months
We are fans of Reinvest24 – they have had a lot of successful projects on their site and have a good team. However we are not sure that this project is one we would invest in. It is a project on the outskirts of Valencia (Spain) that they are undertaking together with a local developer. It lacks planning permission – in fact the local government needs to find and hire a new town planning official before they can even get that process underway. The loan term is 9 months, yet it doesn’t seem like there will be much progress on the development in the next 9 months let alone an exit. And the final concern – the project is only forecast to make a development margin (profit) of less than 3%. That is far below the normal margin required to perform a development project like this. It is best to lend on projects with high development margins – this is a buffer for lenders in case things go wrong.
Montesano stage 3
Interest rate: 12%
Term: 18 months
1st lien mortgage
How much is an old castle located on an island off the north east coast of Germany worth? €1m? €20m? We are really glad that we are not the expert appointed by Estateguru to answer that question. The 42 page valuation report is very professionally done but if you read the details it’s pretty clear – there’s no easy answer. There’s no similar castles or other properties that have been sold recently. That’s why it can be risky lending against properties like this. You don’t know that the valuation is wrong until it is too late. An additional layer of risk is the historic nature of the property, which means potential for lots of hidden extra costs when developing the property and difficult planning issues too. Lastly – Germany is not short of willing bankers with large sums available to lend against solid projects. It’s hard not to feel that Estateguru is effectively a ‘lender of last resort’ for developers in Germany. That seems to be reflected in the performance statistics so far, with 57% of German loans funded prior to June 2021 having a late status.
If you are interested in any of the loans above, please make sure to read all the information provided by each investment site and make sure that they are suitable for you. While we aim to highlight potentially interesting opportunities, you must perform your own assessment of the risks and make your own independent decision on whether to invest, and whether these, or similar loans offered on each site are suitable for your investment objectives. All information is supplied in good faith based on information which we believe, but do not guarantee, to be accurate or complete; we are not responsible for errors or omissions contained therein. Explore P2P is not a financial advisor and no content can be or should be considered to constitute financial advice. All content provided is for informational purposes only.