Times, when only banks could issue loans and gain profit using your money, is over. Now thanks to crowdfunding everyone can make money by issuing loans on regulated platforms and make up to 15 percent per year instead of 4 percent from deposits.
In this article, we will try to answer major questions about investing in loans.
Question number one: How can I invest in loans?
The easiest way to invest in loans is, via crowdfunding also called crowdlending or peer-to-peer lending. Crowdfunding allows you to invest in loans with a few clicks and starting from as little as 10 euros on regulated platforms.
To start investing you need to choose a crowdfunding platform and register. When it is done you will get access to fundraising campaigns on a platform posted by borrowers and reviewed by the platform.
You chose a campaign that matches your risk appetite, returns, and maturity and you provided a loan via the platform. After a defined maturity, you are getting money back plus interest which might be up to 15 percent per year.
You can find a list of more than five hundred European crowdfunding platforms and learn more about crowdfunding on Crowdinform.com.
The European platform offers a wide range of loans to loans to invest.
If you are looking for more secure loans you should focus on real estate-backed loans that ensure 7-12 percent annual returns and have maturity from 12 to 60 months.
Learn more about investing in real estate loans here.
There are a wide variety of business loans that are provided to all kinds of industries that can provide returns of up to 15 plus percent per annum with maturity from 6 months to 60 maturity.
Learn more about investing in business loans here.
If you are looking for short-term loans you should look for investments in private loans or invoice trading also called factoring.
Learn more about invoice trading here.
To make a successful investment in the loan you need to answer those 3 questions
What is the probability that the borrower will not be able to repay the loan, the so-called default rate?
Some platforms are assigning ratings to borrowers which indicate what is the probability that borrowers will not be able to repay loans on time. If such a rating is not provided you will have to analyze the borrower by yourself using a historic or future performance. You can read about how to perform financial analyses here.
The second question is, if the borrower will not be able to repay the loan how much money I will lose?
Most loans are secured with some assets also called collateral that will be sold in case borrowers fail to pay, thus you need to evaluate the potential value of those assets and how much of the outstanding loan it will cover.
And a third question is given the potential default rate and loss in case of default, are offered returns sufficient?
There is a formula called RORAC or returns on risk-adjusted capital that is used to calculate returns from loan investments given potential risk. To simplify things for investors we prepared a RORAC calculator for you which you will find here.
There are many great crowdlending platforms in Europe allowing investors to make great returns by investing in loans. Let’s review a few biggest players.
We will start with the Swiss platform Lend that are offering to invest in Business and private loans as well as mortgage loans. The total amount of processed applications by Lend reached 3.6 billion CHF.
October is a French crowdfunding platform dedicated to business loans. Via October was financed business for an amount of more than 1 billion Euros and the rate of return in 2024 was close to 8 percent.
CreditGate24 is another large crowdfunding platform from Switzerland with volumes of processed applications of 2.4 billion CHF and a current portfolio of 100 million CHF.
Anaxago is a large Franch crowdfunding platform that offers different investment types including investments in business loans. The average rate of returns on Anaxago is 9.8 percent.
FOLK2FOLK is a crowdfunding platform from the United Kingdom that offers to invest in business loans backed by real estate with returns of 8.75 percent but a minimum investment of relatively large 20,000 GBP.
Geldvoorelkaar is the first Dutch crowdfunding platform with funding volumes of more than 500 million EUR. gross returns on Geldvoorelkaar are around 7.43%.
There are also many great platforms that are offering to invest in renewable energy projects - Duurzaam Investeren is the largest Dutch investment platform for sustainable projects with funded volumes of 343 million EUR. Triodos Crowdfunding was launched by UK Triodos bank with funding volumes of more than 200 million GBP. French platform Enerfip with funding volumes of 477 million EUR with an average rate of return of 5.49% since year 2015.
Follow Crowdinform.com to learn more about crowdfunding and how to invest!
We wish you all the best and successful investing!
