Most investors around the world have heard about stocks, bonds, commodities and other types of financial assets. However, laons – one of the oldest financial instruments have been out of reach for ordinary people. Barrier to entry the market is quite high as you‘d need an infrastructure, personnel, marketing and a lot of capital to start issuing loans.
The rise of sharing economy is distorting the status quo as investors are able to co-finance loans simply by using their own computer. There are loads of platforms where the minimum investment amount is just 10 EUR.
You may say that peer-to-peer lending means lending money to other people of businesses. Such kind of investment is geting momentum as more and more investors try it out and experience a satisfying risk-adjusted return, which usually ranges from 10 to 20% per annum.
WHAT IS P2P LENDING MARKETPLACE?
P2P lending marketplace is sometimes called P2P version 2.0. There is one additional element in such business model – a loan originator. Loan originator is a company that issued loans to borrowers and sell claim rights of the underlying loan to investors via lending marketplace platform. This model shortens the time that borrower has to wait to receive money. Sometimes it happends in the matter of hours. Later, the loan is put online where all registered investors can purchase claim rights of the underlying loan. Investors can feel confident and safe about their choice for several reasons:
● Loan originator keeps at least 5% of the claim rights, meaning that it is in the same boat together with investors;
● Loan originator that issued the loan has a track record and experience in the loans industry;
● Employees have competencies to assess borrowers and manage processes until full repayment of the loan;
● All documentation collected, signed and stored to adhere all regulations.
It is important to emphasize the fact that loan originators at P2P lending marketplace Lenndy only issue loans to businesses. Often additional safety measures are taken to ensure sucessful recovery of the loan, such as pledged assets, loan originator‘s buyback guarantee, personal guarantees and etc. One more example in the case of credital business loans – only loans with at least 2 completed scheduled payments are listed on Lenndy, which significantly reduces the risk of default. Statistically, 90% of the time defauled borrowers fail to pay 1st of 2nd scheduled payment.
BOTH SIDES WIN
Tradional financial instruments are often used for speculation, meaning that if somebody wins, somebody has to lose. P2P investing is more suitable for people who would ike both sides to benefit from the investment.
Businesses that borrow money will use it to increase revenue, earn more profit and will be able to repay the loan with interest. Lenndy lending marketplace enables investors to support businesses in Lithuania and earn great returns. Also, usually there is less risk if the money that you lend are used by the business compared to consumer loans where the money you lend are used by poeple who can‘t save enough to buy something they want.
BUSINESSES ARE WELCOME TO INVEST
Do you represent a company that has unused funds in your current account? It is a great opportunity to put it to good use and earn 12-15% annual return at Lenndy marketplace.
WHAT ARE THE RISKS OF P2P LENDING?
There is no surprise that there are some risk associated with P2P lending that all investors should be aware of. First risk that comes to mind is the borrower’s risk of default. According to agreements signed with loan originators, it is their responsibility to take all action required to recover the loan including maintaining communication with borrower and bailiff if necessary. In order to make loan originators adhere to the rules, they always have to keep at least 5% of the underlying loan on their books meaning that their interest is aligned with interests of the investors.
Another question is what happens when loan originator becomes insolvent? Lenndy has clear process in order to maintain management of the underlying loans. Investors purchase claim right of individual underlying loans. Given loan originator goes bust, all underlying loans will not be affected and will be taken of by Lenndy operator or a chosen 3rd party. New loans will not be issued by the loan originator in question in such scenario.
We would strongly advise all investors not to „put all their eggs in one basket“, meaning that diversification is a key prevent major losses. In order to reduce risk it is wise to include over 100 loans in your investment portfolio. In the situation where few borrowers default on their loans, the amount lost would be significantly lower.
All of these factors together go a long way to protect investors and make the Lenndy P2P marketplace a great place for easy, transparent, and diversified investment experience. As with all forms of investments, when investing in loans through the Lenndy P2P marketplace, your capital is at risk. We are constantly growing to serve the needs of our investors help them earn great return.