Let\u2019s talk about the elephant in the room:<\/p>\n
Risk.<\/strong><\/p>\n If you have ever invested, then you know that any reward comes with a bit of risk.<\/p>\n But how much is too much risk?<\/p>\n Where do you draw the line? And how can you minimise peer-to-peer lending risk while maximising return?<\/p>\n These are the questions that investors will be asking themselves before they take the leap. And yet they are incredibly important to ask yourself whenever you plan on investing in a new asset.<\/p>\n If P2P investing<\/a> is an investment asset you\u2019re considering, then it\u2019s important to understand the risks, the rewards, and best practices to safely navigate this industry.<\/p>\n At least, that\u2019s how the best investors<\/a> like to do it.<\/p>\n At Swaper, we are committed to being transparent about the benefits as well as the risks of P2P lending. That\u2019s why in this article, we\u2019ll cover:<\/p>\n Let’s be clear:<\/p>\n P2P lending<\/a> is just as safe as investing in the stock market<\/a>.<\/p>\n However, all investments carry “a level” of risk.<\/p>\n The peer-to-peer lending risk is higher when you invest in an unsecure or illegitimate platform. <\/strong><\/p>\n We\u2019ve all heard the stories of email scams or fake ATM machines that steal and clone your information. With P2P investing, what happens is that certain platforms turn out to be \u201cfake shell companies\u201d that don\u2019t actually invest in loans.<\/p>\n These illegitimate companies may pay back early investors using funds collected from new investors. This is an unsustainable business model (similar to a Ponzi scheme),and causes the company to collapse. In other cases, the founders simply take the investments and run.<\/p>\n So how can you make sure you\u2019re investing in a legitimate P2P platform?<\/p>\n The key is to invest in a platform that is very transparent with its investors.<\/strong><\/p>\n P2P investing doesn\u2019t fall under typical regulation<\/a>, which means the platforms are rarely supervised by any Financial Supervisory Authority. This essentially means your investments are not guaranteed in any way, and you need to rely on what the platform says.<\/p>\n At Swaper, we publish our annual reports every year<\/a>, publish our CEO letters to investors<\/a> and are in constant communication with our users<\/a>. We\u2019re also transparent in how much money we\u2019ve returned to our investors via our Statistics page<\/a> \u2013 more than \u20ac3 million to date.<\/p>\n To summarise: it is safe to invest in P2P investing as long as you choose a platform<\/a> that is transparent, communicates with its investors and is a genuine, registered company.<\/p>\n There are 4 risks to take into consideration when investing in P2P loans<\/a>.<\/p>\n When it comes to P2P investing, there is always a risk that the borrower won\u2019t repay their loan. When you deposit money into your account and start investing, there are two proposed outcomes:<\/p>\n The good news is that at Swaper and with our Buyback<\/a>, we can refund both the principal and the interest – that means you won\u2019t be losing any money no matter how late the borrower is.<\/p>\n Currency risks relate to exchange rate fluctuations and the fees associated with making transfers. When you open an account with a foreign currency, you\u2019ll always need to factor in the currency exchange and fees your bank might charge you.<\/p>\n At Swaper, we allow investors to open an account with either a Euro or British Pounds account. Those who hold other currencies can still invest using the Wise platform<\/a>, who we\u2019ve partnered with to transfer euros or GBP at a very affordable rate.<\/p>\n Many P2P platforms source their loans from loan originators<\/a>. <\/span><\/p>\n Loan originators (LO for short) are companies that are in charge of managing borrowers: finding borrowers, making sure they pay on time and collecting interest payments.<\/span><\/p>\n There is always a risk that a loan originator could go bankrupt, either due to a high amount of credit defaults or mismanagement of their business. For this reason investors should also check a loan originators\u2019 financial statements. <\/span><\/p>\n Although we offer buyback at Swaper, there is still loan originator risk when investing in loans from our LO, Wandoo Finance<\/a>. <\/span><\/p>\n Like any other company, there is always the risk that a platform could go bankrupt. This could be due to lack of investors or loans,\u00a0 poor management of the platform or if credit defaults are too high. In this case, the platform files for bankruptcy and investors may risk losing their money.<\/p>\n In the unlikely event of liquidation for Swaper, investors would retain the assignment rights of their loan and have the full permissions to continue to claim against the borrower.<\/p>\n This is because all of our loan assignment agreements are transferred and owned by the investor as soon as funding begins. This means that you\u2019ll still own your investments even if the platform goes bankrupt.<\/p>\n Our loan originator, Wandoo Finance Group, issues loans in Europe with an annual interest rate relatively higher than investors receive from Swaper.\u00a0This high margin is in excess of the 14-16% offered to Swaper investors and it\u2019s what allows us to cover operating expenses as well as the cost of risk.<\/p>\n The average stock market return has been sitting pretty at 8%<\/a> investment returns since 1871.<\/p>\n Although it\u2019s not a bad return, it\u2019s not always attainable and can fluctuate widely from year to year.<\/p>\n In fact, many of the other assets will not beat this rate. But peer-to-peer lending can.<\/p>\n With Swaper, for example, investors can expect to receive 14% returns. Not only is this a higher than average return, but fluctuations aren\u2019t so varied, and returns are more stable.<\/p>\n We also offer a loyalty bonus program for our most frequent investors. This means that private customers who commit to lending \u20ac5000 or more will earn 16% of interest<\/a> on their investments.<\/p>\n This makes P2P investing an ideal asset for those who want to grow their investments enough to retire early<\/a>.<\/p>\n Committing thousands of euros to a property<\/a> or a business is quite limiting as you often won\u2019t be able to access that money for years.<\/p>\n P2P investing offers a good alternative<\/a>: instead of waiting for years to liquidate your hard working euros, you can withdraw your earnings typically over a period of month. And on the secondary market<\/a>, you can sell your investments in hours, rather than days.<\/p>\n This means you don\u2019t lock in your investment for more than the given period, and you get quick access to the returns on your investment.<\/p>\n With peer-to-peer lending<\/a>, you don\u2019t have to self manage any investments or learn the ins and outs of how businesses operate. Swaper offers an Auto-Invest Portfolio<\/a> option that funds loans based on your specific, predetermined criteria.<\/p>\n Through the Auto-Invest function, you\u2019ll be able to determine (along with other options):<\/p>\n This feature is a big benefit of using a platform like Swaper.<\/p>\n Whether you are technically-minded or not, you can enjoy the same benefits and level of return.<\/p>\n The good news is that with P2P lending, you can drastically reduce the investment risk by picking a platform that is transparent, correctly registered and in constant communication with its investors.<\/p>\n At Swaper, we are well aware of the risks that happen in the P2P lending industry<\/a>; that\u2019s why we strive to empower and educate our investors so they always feel comfortable with where they put their money.<\/p>\n Once you\u2019ve analysed peer-to-peer lending risk, we\u2019d love to have you be part of our investor community.<\/p>\n\n
Is it safe to invest in P2P lending?<\/h2>\n
What are the biggest peer-to-peer lending risks?<\/h2>\n
1. Credit risk<\/h3>\n
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2. Currency risk<\/h3>\n
3.\u00a0Loan originator risk<\/strong><\/h3>\n
4. Platform risk<\/h3>\n
What are the advantages of investing in peer-to-peer lending?<\/h2>\n
Higher than average returns<\/h3>\n
More liquid than other investments<\/h3>\n
Set and forget it<\/h3>\n
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Conclusion<\/strong><\/h2>\n