Real Estate Lending or Consumer Loans? Why Not Invest In Both! Here’s How They Compare

What’s great about P2P investing is that you can invest in anything where people require loans.

As you can imagine, there’s a lot of different types of loans you can invest in.

In fact, 70% of P2P lending is business lending!

One of the more popular P2P investment strategies is real estate investing, which can be a low-cost way to get into the property market – without the need to go through banks and mortgages!

Given it’s popularity, we wanted to introduce you to the world of real estate lending as a way for you build your wealth.

In this article, we’ll explore what property real estate lending is, how it works, and how it compares to consumer P2P lending.

What is property real estate lending?

P2P real estate lending is an investment strategy where you invest a small amount of money into various real estate projects.

The biggest benefit with real estate lending is that traditionally, getting into real estate requires a lot of capital. It’s also time-consuming and complicated.

Real Estate Investment Trusts (REITs) came along as an alternative, but in the early days, they were limited in what they could offer investors. With a P2P-spin, real estate lending was born and investors can now gain exposure to property with decent returns and lower costs.

Property crowdfunding allows you to invest in rental properties, group buying opportunities and property loans. Who is the borrower? It’s usually either a business or individuals who need money for projects, whether it’s “flipping” apartments or building a new house.

Instead of going through a bank — which takes a long time, is expensive and applications often get rejected — some borrowers prefer going to an alternative lender such as a P2P platform.

By borrowing through these platforms, the loans are more flexible. Plus, borrowers usually receive the funds more quickly, and don’t have to pay penalties or fines for early repayment. And as an investor, you get to diversify your portfolio with real estate and gain a higher return. It’s a win win!

By investing in property lending, you can expect a return of between 10% and 15% per year.

How does real estate lending work?

When a real estate developer company or individual wants to purchase or upgrade a property, they usually go to a bank to raise money. But these applications often get denied, and that’s when they look for alternatives.

With crowdfunding or P2P lending, investors can now raise money through a platform. They send in an application to the platform, and open it up to any investor that wants to invest. Once enough investors are involved and pay the money, the round is then closed and the borrower has access to the funds.

P2P investors can pick and choose the loans they want to invest in depending on the risk, which will be reflected in the interest rate. The borrower will then repay the loan according to the terms agreed. Investors can usually choose to invest in property loans that are secured, unsecured or through equity (shared ownership).

Depending on the type of loan, the risk is higher or lower.

Real estate lending vs consumer P2P lending

Both real estate and consumer P2P lending are crowdfunding, but there are a few differences between the types of lending.

Here are 6 ways real estate lending compares to P2P lending:

1. Returns

First, and perhaps the most important part of any investment you make – your returns.

Consumer P2P lending offers higher returns than real estate.

The best peer to peer lending platforms will give you an average return of 11% – with Swaper delivering above average returns of 14% (and as high as 16% if you invest €5,000 for more than 3 months).

With real estate investing, the return is closer to 10%.  Although 10% is certainly a healthy return, it’s still lower than what you can expect when you invest in consumer loans.

2. Portfolio diversification

Many investors believe that property should be a part of every serious investor’s portfolio. It’s one of the assets that performs well over time and will always offer healthy returns. If you invest in consumer loans, you won’t be exposed to the property market, so that asset will not be part of your portfolio.

However, if you’re trying to get into real estate, then P2P property investments would be a great place to start.

3. Liquidity

Although this depends on the platform, average real estate investments will always be less liquid than consumer loans.

And that makes sense: it takes months and even years to develop or upgrade a property. Real estate projects will always take longer and require more resources, which is why it might be quite some time before you get your money back.

Another thing: not many P2P property platforms have a secondary market to sell your investments if you want to cash out.

This is different to short-term consumer loans, where you’ll receive your money once a month.

Also, it’s more common for P2P platforms to offer secondary markets, like Swaper does.

4. Research

With real estate, every project is very different. When you pick a project to invest in, you will need to read through it, understand the terms, resources used and be familiar with the metrics: Loan to Value, financial ratios, etc.

Since real estate projects vary a lot, it’s usually best to manually invest and handpick the projects yourself.

This is different to consumer loans, where you don’t need to do as much research. That’s why Auto-Invest is so popular!

As an investor, you can set up your portfolio, sit back and let the platform do the work for you.

5. Risk

Real estate investing is less risky than consumer lending. That’s because real estate investing usually works with investors who have mortgages as collateral. If an investor cannot pay off their loan, then the process is fairly straightforward: repossess and sell the house, and refund the investors.

With P2P lending, most loans are unsecured and therefore, result in more risk. Not a lot of risk, but it’s still considered more risky than real estate.

6. Accessibility

Several P2P property lending platforms require at least €100 to sign up.

Others, require at least €50.

It’s not a huge amount (and is considerably cheaper than buying a house), but it’s enough to make you think twice before you make your first investment. With real estate lending, it requires a commitment that consumer loans don’t.

For example, with Swaper, you can invest for as little as €10. Anyone can invest and the paperwork is kept to a minimum (you only need to verify your identity).

In terms of accessibility, consumer lending is a much easier investment to get into.


P2P property investing is great if you want exposure to the real estate market and are willing to do your research, learn about property and commit a decent amount to the platform.

However, if you are looking for higher, short term returns and don’t want to spend too much time on research, then consumer loans are your best bet — although be aware that it won’t offer you exposure to the real estate market.

Want to get started with consumer loans?

We can help you. Start with as little as €10 and go from there!

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