Investing in loans

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  • Benutzernamekaufman_d
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Hello! I've been investing in more traditional asset classes like stocks and ETFs and am looking for ways how to diversify my portfolio. I've heard about investing in loans as an alternative passive investment asset class and my little research shows there are several platforms in Europe that offer such investment options.
Does anyone here has any experience with investing in loans?
How safe is it and what are the more realistic annual returns?
Thanks!

 
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  • Benutzernamejeanluc
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There's definitely risk involved. I would venture to say that both loans are possibly a more risky investment now with covid than they would normally be. But that's just my opinion.

Like with any investment, the best way to reduce risk is to divide up your capital between many different loans. Also stick to loans with good creditworthiness scores for the bulk of your p2p lending investment, with maybe just a small component of higher-risk loans to balance the returns.

As far as security, it's safer than giving a private person a loan directly because you can diversify between many loans. The p2p platform does some due diligence to find the borrower's creditworthiness, which also gives some security. Also, p2p platforms generally make the borrower insure their loan repayments for disability or death. There is normally no insurance for unemployment or for defaults for any other reason than the borrower becoming disabled or dying. if the borrower defaults you will have to hound them yourself via the Betreibungsamt.

Here's are some Swiss peer to peer lending platforms to look at:

  • Creditgate24.ch

  • Crowd4cash

  • Lend.ch

  • Swisspeers

 
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  • BenutzernameMoneyguru von moneyland.ch
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You can find some basic information on peer to peer lending and crowdfunding in these guides:
Peer to peer lending guide
Peer to peer loans in Switzerland
A basic guide to crowdfunding in Switzerland
Private loans in Switzerland: How to protect your investment

 
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  • Benutzernamekaufman_d
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Thanks for prompt suggestions! 
I probably should have mentioned in my post that Im looking for investing in EUR, so probably smth beyond Swiss platforms. 

@jeanluc do you invest in any of those platforms? Would you care to share a range of what annual returns you are getting? Sounds like you are familiar with what's happening with these type of investments.
What you mention about directly lending is exactly the reason why I'm looking for reliable platform that would perhaps allow to set up automatic investments. 

Edit: I actually did some googling and looks like some of the leading platforms (and just in general a lot of them) are based in Baltics. Does anyone has any experience with those (Twino, Swaper, Bondora, Mintos, Crowdestor...) ?

 
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  • Benutzernameharold
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The Swiss P2P loans platforms are pretty well set up for investing in a basket of loans. In fact, I believe Swiss laws or norms require capital to be spread across multiple loans. The Swiss P2P platforms also benefit from a pretty solid credit bureau structure (municipal credit bureaus, ZEK, IKO, plus private credit bureaus like CRIF and Intrum). It is also pretty easy to initiate debt collection cases against defaulters. Add to that the relatively low unemployment rate, Kurzarbeit, unemployment insurance, social help, etc. and you have a pretty strong argument for investing in Swiss P2P loans.

The potential returns of foreign P2P platforms may appear more attractive, but P2P loans are already a high-risk investment (even in Switzerland), and lending to foreign borrowers just multiplies that risk exponentially. I wouldn't rule it out completely, but I would only recommend investing money which you can easily afford to lose.

In every case, I recommend starting with the minimum required investment capital and raise the amount you invest as the platform proves itself.

LEND is a good option for smaller investments (10,000 francs on up). You can find a good amount of borrowers with A+ credit ratings that still pay decent interest. It is well established in Switzerland and has proven itself reliable. It offers a Roboinvest asset mangement service which automatically invests in a portfolio of P2P loans (available from 40,000 francs or more).

Both Lend and creditgate24 have mututal funds operated by 1741 fund managers in Liechtenstein, but these are only open to institutional investors. The max. TER is 1%, so not cheap.

 
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  • Benutzernameharold
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Re euro loans, I don't know of Swiss P2P lenders which offer this. I would recommend sticking with platforms and borrowers in countries with high employment, good unemployment protection and social benefits, and good lender protection and credit bureaus. Germany and the Benelux countries come to mind. I'd steer away from platforms based in Eastern Europe, Malta, Cyprus or the Balkans, unless you have good legal connections in those countries that can help you recover your money if the platform just disappears from the net one day. Most importantly, you will want the borrowers to be in countries in which you could easily press debt collection charges if a borrower defaults.