Loans we love – and some we hate. The best and worst P2P loans for December 2018
Our pick of the best P2P loans currently available
We list below what we think are some of the best P2P loans currently available in the UK and Europe. These loans may sell out very quickly. Even if they do, it is likely that similar opportunities are available on each platform.
Our goal is to help highlight the types of opportunities that are available on various platforms, and which types of loans offer the best balance of risk and reward.
Why we like it
Interest rate: 10.5%
Term: 37 months
Secured car loan
We like this loan from Mogo a lot. It is available for sale on the secondary market on Mintos. Mogo is one of the highest rated lenders on the Mintos platform. Mintos recently announced that Mogo had issued a corporate bond, paying 9.5%, and it would use much of the proceeds to buy back loans from Mintos investors (at par). The buyback is expected to be quite substantial – up to 45% of all loans outstanding currently on Mintos. If we were running Mogo, this loan would be high up our list of loans to repurchase. The borrower has been making payments successfully for almost 3 years, the interest rate is above 9.5%, the LTV is low, and it has a buyback guarantee. Investors purchasing this loan today will get a running yield of 10.5%, and if the loan is repurchased in 2 months the effective return will have been around 13%. There are many other loans available with similar profiles, and we think any loans trading at a discount, that have buyback guarantees and a yield of 9.5% plus are interesting. Similar loans to this are also available currently and are attractive in our view.
Interest rate: 9.6%
Term: 7 months
1st lien mortgage
This loan from Bridgecrowd is a good example of why we rate the site so highly right now. It is true that the collateral is not the best looking property you will ever see. However it is very inexpensive, and lower priced properties are much more liquid than higher priced properties currently in the UK. The property is also going to be renovated by the purchaser, which will add value and make it easy to sell. A return of almost 10%, for a first lien 55% LTV loan is very attractive in our view. That’s why Bridgecrowd loans are selling out within an hour of being released each Friday. If this type of loan is appealing, you need to register as an investor and act quickly once new loans are released. The only downside of Bridgecrowd is that the minimum investment in each loan is £5,000, so it suits investors with larger sums available to invest.
Interest rate: 11.5%
Term: 24 months
1st lien mortgage
This loan from Estateguru is secured on a fairly new hotel complex located in Estonia. The rooms look well maintained and tastefully decorated. A quick check of hotel site booking.com shows an average customer rating of 8.9/10 and also that it seems to have a high occupancy rate. These are vital things to check before buying a loan secured against a hotel. The borrower generated strong profits in 2017. In our view, a return of 11.5% is attractive given the low LTV of 53% and the quality of both the borrower and collateral.
Interest rate: 6.6%
Effective LTV: 58.7%
Term: 8 months
1st lien mortgage
This loan offered by Kuflink demonstrates a fairly common use of bridge loans. A developer has successfully completed a development and has sold almost all of the properties. Developers then use a bridge loan that is secured on the last remaining properties to free up capital for the next development. There are two positive features of these types of loans – firstly, there it is easy to value the properties because identical/very similar loans have been sold recently. Secondly, the real estate is new, generally high quality and will typically sell well above the loan amount. While the stated LTV is quite high on this loan at 74%, Kuflink provides a 20% ‘first loss’ guarantee on their self-select loans, which means that the effective LTV of this loan is only 58.7% taking the guarantee into account. Note: Kuflink are also currently offering quite a generous £100 bonus for new investors who use our special link (see our bonuses page for details)
‘Brampton Road’ loan
Interest rate: 12%
Term: 18 months
1st lien mortgage
We recently published an interview with the CEO of Blend Network. We thought it was worth highlighting here a typical loan that Blend offers (although this specific loan has now sold out). The loan is to a smaller developer with a strong track record. It has some similarities to the Kuflink loan above, in that most of the development has been successfully completed and sold. All cottages were successfully sold prior to completion of construction. This loan is being used to help fund the construction of the last few remaining cottages on the development site. We like the borrower profile, the small size of the loan (only £230,000) and the fact that the developer has demonstrated already that there is strong demand for these assets. An interest rate of 12% seems more than fair to us, particularly with a LGDV of only 53%.
And here are two we DON’T love right now….
Interest rate: 10%
Term: 3 years
This loan, offered by Irish site Flender, is quite simply a loan to a hair salon. Hair salons don’t need much capital to operate. Hair dryers are not that expensive. So why do they need this loan? Apparently it is needed ‘for cashflow’. That does not sound great to us. So, what does the balance sheet look like? Is the company profitable? Flender doesn’t want to tell us. Quite simply, it’s impossible to know what the situation is. And unfortunately, when salons fail, there is absolutely no recovery likely for creditors. Because second hand hair dryers are not worth a lot….
‘Di Milo’ loan
Interest rate: 8.5%
Term: 30 days
Where do we start? This Metrokredit loan is listed on Mintos with an 8.5% yield. We rated Metrokredit 13/100 in our Mintos lender ratings. Even Mintos seems to agree, as they have rated Metrokredit C+ in their new ratings. So why the low score? Putting aside for one minute that the lender is operating in Russia, it is a startup lender that was given only €300,000 of equity. Being a startup, it has no lending track record at all to speak of. Their lending scorecard may work well, in which case the Metrokredit shareholders will make millions and Mintos lenders will get their money back. If things don’t go well, the shareholders can just write off a very small investment and move on to the next thing. What happens to Mintos investors in that scenario? We wouldn’t expect much, if any recoveries for Mintos investors.
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 interesting opportunities, you must perform your own assessment of the risks and decide whether these, or similar loans offered on each site are suitable for your investment objectives.