Lendermarket Review 2020 - 14% Fixed Annual Returns When Investing In Consumer Loans
Table of Contents
What Is Lendermarket And What Is Its Relationship With Creditstar?
Lendermarket is a peer-to-peer lending platform, registred in Dublin, Ireland and founded in 2019. Although the platform itself is fairly new, it is established by Creditstar, a major European financial service provider which has been founded in 2006 already.
Creditstar operates in 8 countries across Europe, including Estonia, Finland, Sweden, Poland, the UK, the Czech Republic, Spain and Denmark. It serves over 900.000 customers and employs over 100 people and has offices in Tallinn, Warsaw, Londen and Vilnius. It offers short-term consumer loans (so no business loans) via its subsidiaries.
Creditstar might be known to investors investing with other P2P platforms, whereas it is also operating on the Mintos platform since 2016. It has a portfolio of around EUR 22 million at the time of writing (May 2020), thereby being in the top 10 of largest loan orginators on the Mintos marketplace.
One might wonder why Creditstar is starting a whole new P2P platform when it is already operating on Mintos. The main reason is that Creditstar has to pay Mintos for accepting its loans on the platform. Cutting costs by starting its own platform makes sense with the huge amount of loans Creditstar is offering, especially when the company wants to grow even more.
Finally, and most importantly, the Creditstar Group has been profitable since its inception. Over the last 6 years the Group as a whole averaged a net profit of over EUR 1,5 million a year, has a strong balance sheet and good net profit margins. Briefly put, the Group has a solid financial trackrecord and is very well capable of upholding her financial obligations, which is reassuring when one wants to invest in a company.
How Does Lendermarket Work And What Are The Returns?
Lendermarket is a peer-to-peer marketplace and offers solely loans from Creditstar. All of those loans are already funded, which means that the actual loan has already been issued to the borrower. As an investor you can actually invest in it by refinancing a particular part of a loan, and diversify by chosing loans from multiple countries, earning a profit of up to 14% annually.
Creditstar on its part will check whether each borrower is capable of taking a loan and whether it is responsible to do so. Over 70% of new loan applications are rejected either because of the strict regulations of the country Creditstar is operating in or its own lending policy.
Every single loan offered on the marketplace comes with a buyback guarantee. When a borrower is not capable of repaying the loan, Creditstar will buyback the loan. This way, the investors’ funds are safeguarded. We’ll elaborate on this later on.
Who Can Invest With Lendermarket?
First of all, if you are an EU citizen (for Lendermarket this also includes Norway, Iceland, Gibraltar and Liechtenstein) or own a company within the EU or the aforementioned countries you can start investing.
There are some additional requirements though:
- You should be at least 18 years old,
- Be resident of and tax resident in a country within the European Economic Area, Switzerland or any other country listed below,
- Have their identity successfully verified due to anti-money laundering regulations.
Recently Lendermarket has expanded its list of countries it accepts investors from. It already accepted all the EEA countries and Switzerland, but a notable exclusion was Ireland. Investors from Ireland will be accepted starting June 2020. Additionally, other countries like Australia, Brazil, Canada, India, Indonesia, Russia, and the United States have also been added, whereas Lendermarket now accepts investors from over 75 countries. If you’re not from one of the aforementioned countries, you can check whether you are eligible when you sign up.
Signing up at Lendermarket is pretty straightforward:
- Go to www.lendermarket.com and hit the white “Start investing” button;
- Fill out the first form as shown below;
- Continue to the second form and get your email and identity verified;
- You make a deposit and you can start investing.
Registering at Lendermarket:
The last phase is to transfer money from your personal IBAN bank account so that you can be identified. Depositing money can only be done by transferring funds to the Lendermarket bank account which will normally take up to two working days. Depositing is only possible in euros, due to the fact this is the currency you’re investing in. The minimum investment is 10 EUR, there is no limit on depositing money on the platform.
Investment Opportunities With Lendermarket
Once registered you have access to all the loans on Lendermarket. The idea is rather simple. A borrower applies for a loan with Creditstar in Spain, Poland, the Czech Republic, Estonia, Finland, the United Kingdom, Sweden or Denmark for either a microloan, installment loan, credit account or creditline. Once an applicant is accepted, the loan is placed on the Lendermarket platform where investors can choose from multiple loans.
Note that not all the aforementioned countries and loan types are available yet on Lendermarket. What you actually see is a selection of loans, the majority of them being short-term with a maturity date of approximately 30 days. The annual rate is 14% for all loans, including loans with a maturity of more than 30 days. In the example shown below, you can check the details for a short-team loan. There are two things we want to highlight here: the skin in the game and the buyback guarantee.
Characteristics of a short-term loan at Lendermarket:
Skin in the game
The term skin in the game is frequently used in the world of corporate finance. It refers to a situation in which the owner of the loan and/or a company maintain an equity stake in circumstances where outside investors are asked to invest (in this case Creditstar and you as an investor respectively). For you as an investor it is good know that the full loan, and thus the risk, is not only carried by investors, but that Creditstar as a company also keeps a stake in the particular loan. In this way your exposure is mitigated, more so than if Creditstar didn’t have skin in the game.
Buyback Guarantee & Group Guarantee
You’d rather avoid it, but what happens when a loan is not paid back in full? Lendermarket has a buyback guarantee. It is an investment security which guarantees that Lendermarket will repurchase the loan if delayed for more than 60 days after its original due date, at the nominal value of outstanding principal plus accrued interest income and late payment fees. All loans on the Lendermarket marketplace come with such a guarantee.
In addition, the Creditstar Group ultimately ensures the obligations of the buyback guarantee are fulfilled: the Group Guarantee. For instance, if Creditstar Finland for some reason cannot pay back the full amount of the loan, the Creditstar Group as a parent company will ultimately do that. The question is then: are they capable of doing so and can they actually guarantee the buyback?
Essentially, the buyback guarantee is as strong as the company is – otherwise it could not provide the buyback for the investor. Based on the latest financial figures, the Group has been very profitable over the last few years, has a strong balance and good net profit margins. In other words, CreditStar is very well capable of upholding the buyback guarantee.
Risks When Investing With Lendermarket
When investing, an investor will be exposed to a certain degree of risk. There are a number of risks who can be identified when investing with Lendermarket. We touch upon the most common ones.
The first risk that comes to mind with P2P lending is that the client might default. When this happens, and in high numbers, the company might get into financial difficulties. Historically, the level of defaulting loans with Creditstar has been low, the recovery rates are good and fines cover the additional costs made. In addition, Creditstar has been profitable since its inception.
Secondly, significant economic downturn like the current COVID-19 situation may increase the level of non-performing loans. Also, the collaterals of the loan might decrease in value as well. Creditstar has the advantage of having the experience how to deal with its loan portfolio during the financial crisis of 2008. Being proactive with clients and offering reasonable flexibility, like discounts on fees or favorable terms on grace periods and extensions for example, turned out for the better: customers paying on time which in turn is better for Creditstars’ business. The same policy is being applied now, whereas Creditstar is even more selective in accepting new customers from hard hit sectors due to COVID-19 situation.
Lastly, regulations might change in countries of operation. Creditstar is either regulated or supervised, and subject to a number of laws and regulations. If it changes, this might lead to an increase of costs or even decrease revenues. Ultimately, a license can expire or be revoked which could limit or prevent the company’s operations. In all the countries Creditstar is operating it is holding a license to operate its services. Though the regulations are already pretty strict in these markets, we don’t foresee any changes soon that will have a major impact on Creditstar.
Manual Or Auto Investment With Lendermarket
Backed by a solid guarantee, let’s walk through the investment possibilities. Investing can be done in two seperate ways. Either manually, in which case you select the available loans yourself, or by using the auto investment tool which automatically selects loans based on the parameters you’ve set. There are a few things to keep in mind here.
- First of all, once you’ve set the parameters on the auto investment tool there is no hassle logging in, picking the most suitable loans yourself and making sure your money is well invested. This saves a lot of time.
- Secondly, when you pick the loans yourself you have to approve every single loan separately, which is not the case with auto investing. Auto invest again is a time saver here.
- Lastly, when choosing auto investment you automatically participate in new investment opportunities (within the parameters you previously set).
We prefer the auto invest tool because it saves a lot of time once your parameters are put in place. There is no need to wait for the right loan as the tool picks the loans for you. In addition, loan volumes are good at the moment which should result in a hassle free and optimal investment result.
Finally, we prefer the short terms loans with a 30 to 60 day maturity. As there is no secondary market available yet, as an investor you’re not locked in for a period longer than 60 days in case you want your money back.
Setting of an auto invest portfolio on Lendermarket:
Lendermarket vs Mintos
If you are using other investment platforms you might have noticed that Creditstar loans are also listed on the Mintos marketplace. At the moment the vast majority of loans offered on Lendermarket have a maturity of 30 days although there are some with a longer maturity rate. All loans on Lendermarket, whether long or short, have a fixed annual rate of 14%.
There are some notable similarities and differences when it comes to Creditstar loans placed on either Mintos or Lendermarket.
- Interest rates vary on Mintos: they are market driven and not fixed and range from 9.5% to 18% annually;
- There are loans available on Mintos which have a considerable longer maturity date: up to over 50 months. Most of the time these are not available on Lendermarket. The other way around: short term loans are almost not available on Mintos;
- Mintos has a secondary market, Lendermarket has not. So if you want to sell your investments on Mintos, you can do so. This is especially interesting when you have loans with a long maturity date (more than 60 days) as it offers the possibility to sell them before they expire.
Comparing Lendermarket and Mintos, it is definitely worth to invest in Lendermarket when it comes to short-term loans as the interest rate is much higher. If you are interested in long term loans specifically, you’re better off with Mintos because the number of long-term loans on offer is higher as well as the interest rates and if you want to sell your investments you can do so on the secondary market. On both marketplaces you are covered by the buyback guarantee as well as the ultimate guarantee of the Creditstar Group.
Lendermarket or Mintos? Summarized is comes to this:
Withdrawing Money, Taxes & Fees
Once your identity has been verified you can withdraw your funds. This can only be done if you have deposited money in an earlier stage, during which your bank account was verified (when you deposit money, your bank account is verified automatically). Withdrawing money doesn’t cost anything and we got our money back within 36 hours after putting in a withdrawal request. Pulling back funds is only possible in euro and there is no minimum amount you have to withdraw.
Fees & Taxes
Some platforms charge for transferring money, or charge an administrative fee or any variant to use the platform. This is not the case with Lendermarket, which is free of charge so it doesn’t cut into your profits.
Lendermarket doesn’t wilthold any taxes on its platform, it is something you have to take care of yourself. Make sure you act in accordance with applicable laws.
Frequently Asked Questions
Lendermarket is not required by the Central Bank of Ireland to obtain a license. Though, the Creditstar Group is operating in Sweden, Finland, the UK, Poland, the Czech Republic, Denmark and Estonia. In all of these countries Creditstar has obtained a license from the authorities and is authorized to operate its services.
Lendermarket and Creditstar are fully owned by mr. Aaron Sosaar.
Lendermarket doesn't have a grace period. This means that if a loan is due May 1st, it is considered late on May 2nd. This is definitely an advantage compared to other platforms.
Lendermarket does not reveal any personal data of the borrowers in order to comply with data protection laws.
No, Lendermarket does not have secondary market at this moment.
You can not really avoid loans turning late.
On the other hand, at this specific moment chances are higher loans will turn late due to COVID-19. Borrowers will get favorable terms on extensions for example and as a result of that the amount of loans that are late will increase.
You can use the link here and get a 1% sign up bonus. If you make a deposit of EUR 1.500, you'll get EUR 15 as a bonus.
Overall Conclusion On Lendermarket
Although Lendermarket is a fairly new P2P platform, we rate Lendermarket 4/5: it is a solid marketplace with a lot of growth potential:
- The buyback guarantee ensures you get your investment back and is it a comforting thought you’re are covered by the the Creditstar Group with a very solid financial track record.
- The amount of loans available is impressive, certainly compared with competitors like VIAINVEST or Robocash;
- The fixed annual interest rate of 14% is competitive and guarantees a stable cashflow once you start investing;
- Most loans have a maturity of 30 days or less, so you get your money back rather quickly if there is a need to.
All in all, Lendermarket is one of the best P2P platforms we’ve come across. The website is very easy to use and the actual investing doesn’t take much up of your time once you’ve gotten used to it. Therefore, Lendermarket is definitely a platform to include in your investment portfolio.
If you sign up via this link, you will get an extra bonus of 1% over the amount deposited within the first 60 days. This means that if you deposit EUR 2.000 in this particular period you’ll get EUR 20 as a bonus.
Summary & Overall Rating
To wrap up and give you an overview, the main features of Lendermarket are summed up below:
- Solid performance and track record
- Very easy to use website
- Buyback guarantee on all consumer loans
- Fixed annual interest rate of 14%
- Backed by parent company, Credit Star Group
- No secondary market available
- Relatively low diversification options