Bondora is one of the biggest peer-to-peer lending platforms, which is based in Estonia, in Europe. According to the company, It has processed over 250 million Euros worth of loans since 2009.
The company has a great record in peer-to-peer lending services and could be a good way to either borrow or lend, depending on your needs. Peer-to-peer (P2P) lending is a relatively new way to gain access to credit, or invest.
With P2P lending, there is no bank. Instead, a person that wants to lend money is able to do so directly, with the help of a platform like Bondora. There are some advantages to both parties. For investors, P2P lending is a new way to invest in debt, but without the help of a bank that creates bond funds.
Bondora has a lot of ways that lenders can invest in debt. There are no fees to invest in debt on its primary market. However, if you want to invest in the secondary market (buying shares in loans other people already invested in), then you will have to pay the fees.
Let’s have a look at Bondora, and what the company can offer to eligible investors.
Bondora at a Glance
- 1 Bondora at a Glance
- 2 What is Bondora?
- 3 Investing in Loans with Bondora
- 4 Who Can use Bondora?
- 5 Bondora for Borrowers
- 6 Do P2P Investments Make Sense for You?
- 7 Bondora: The Rundown
- 8 Bondora – Pros and Cons
- 9 Bondora
- 10 Pros
- 11 Cons
|Bondora - Visit|
|Product Type||Peer to Peer Lending|
|Potential Return||6.75 - 10%+|
|Fees||€1 Fee to Withdraw|
|Available to||European Union, Switzerland or Norway|
What is Bondora?
Bondora is a platform that aims to deliver investors with a smooth, fast user experience and automated investing in P2P loans.
Bondora’s target markets are Spain, Estonia, and Finland. These countries have a low debt to GDP ratio, which makes them a better place from a lender’s perspective.
The focus of Bondora is non-secured loans with principal of 500 EUR to 10,000 EUR with a repayment term that ranges from 3 to 60 months. Of course, there is a risk in making any kind of loan, which is a topic we will dive into below.
The Estonian financial supervision authority licensed Bondora as a credit provider. This authority oversees banks, credit intermediaries, insurance companies, fund managers, payment service providers, e-money institutions, pension funds, and is the primary financial regularity body in the Estonia government.
The company has a professional operation team with a strong background in consumer credit, asset management, and retail banking.
Apart from supervision and management members of the board, the key stakeholders in Bondora are subsidiaries of a US-based private investment firm that has more than 3.4 billion USD, and Global founders’ capital which is the biggest shareholder.
Investing in Loans with Bondora
If you want to use Bondora to make P2P loans, all you need to do is register with Bondora, and deposit money to buy loans. It is easy to get started with the platform. Just create your account, and then make a deposit.
Opening an account will your name, email address, and phone number. After you create your account, Bondora will send you an email that details the rest of the registration process.
The platform complies with KYC (know-your-customer) regulations, and it will require documents that confirm a user’s identity before you deposit or withdraw money from the platform.
You will be able to fund your account before completing the full KYC check, but it is a good idea to do it as soon as you register, as you won’t be able to take money out until it is done.
How to Deposit and Withdraw Funds with Bondora
The process for deposit funds with Bondora is done in three steps:
- First, just use any accepted means to deposit funds into your Bondora account.
- Once you make a deposit, your funds will be available in one to three working days.
- You will receive a confirmation email once the funds are added to your Bondora account, and you can start investing
Before you withdraw your funds it is important to validate your account with the appropriate KYC procedure. If you have done this already, then it is really simple and easy to withdraw your funds.
You just have to follow the same steps that are listed above, in the reverse order. Decide how much you want to withdraw, decide on what account you want to send the money to, and then wait a few days for Bondora to execute the withdrawal.
It should be noted that there are no restrictions on funds withdrawal with additional fees or commission-except from your bank account. Remember that your bank might charge a transaction fee or currency exchange fee, but Bondora won’t.
How Investments are Structured at Bondora
Like any lending platform, there is a risk that if a borrower can’t pay back their loan, the lender will lose their money Here is some more information about how Bondora structures loans, and what kind of options lenders have in the event of a default.
There are two basic kinds of investment structures on Bondora’s P2P lending platform.
- The direct structure The direct structure means that a lender will make a loan directly to a borrower, without an intermediary. In this arrangement, the lender would be able to go after the borrower directly in the event of a default, as the loan is made on a direct basis.
- The indirect structure The indirect structure uses a loan originator that will create a loan, which an investor then buys. In this structure, the loan originator is the counterparty, which may be preferable for some investors. If a borrower defaults, the lender may not be affected, as they have an agreement with the loan originator, not the borrower.
- Go&Grow Bondora also has a program it calls Go&Grow, which allows investors to lend money to Bondora directly. In this structure, Bondora will invest an investor’s money with borrowers, which makes Bondora the counterparty. If Bondora were to go bankrupt, then the investors will lose any money that was invested in the Go&Grow program
Who Can use Bondora?
People who want to invest with the Bondora platform need to be over the age of 18, as well as residents of the European Economic Area (EEA), Switzerland, Norway, or any other country that is approved by the Bondora. If you are curious about whether or not you can invest with the platform, send them an email.
Investors from Singapore, South Africa, The United States of America, Australia, Brazil, Canada, Hong Kong, India, Japan or South Korea can also qualify to invest with Bondora, but they will have to do more paperwork.
The qualifications for investors from non-EEA/Swiss/Norwegian will vary, and Bondora can answer any questions you might have.
Bondora is constantly working to make its interface easy to understand and use. The interface has evolved a lot in the last year. The Portfolio Manager is the heart of the Bondora user interface, and you will start there.
Bondora has a user-friendly interface for the portfolio manager with the three investment types described above.
In addition to the three loan types, investors also have multiple options to filter loans based on the data that is available about the borrower and the loan specifications. These filters allow you to surf quickly through loans, and find any available loans manually.
There are also predefined plans that Bondora offers if you want to invest without choosing every loan manually.
There are currently three plans:
- Investors who want to invest in a simple and easy way can use the Go&Grow plan. At the moment it yields 6.75%, but that can change at any time. As mentioned above, your counterparty is Bondora with this plan, and a single loan default won’t mean anything to your returns.
- The portfolio manager has variable returns based on the strategies you choose. The default plan can yield between 10% and 18% depending on the strategy you choose. These loans can be direct or with a loan originator, and there is substantial risk involved in any debt investment strategy that has the potential to yield over 10% per year.
- Portfolio Pro is aimed at advanced users of Bondora who want to select the exact loans they will buy. The return on this kind of profile depends on the loans an investor chooses to buy and can range from 6% to 20%. The more risk an investor takes on, the higher the potential return.
Bondora Loans Liquidity
Apart from GO & Grow, the other kinds of investments like portfolio pro and portfolio manager are quite illiquid. Although there is a secondary way to buy and sell loans with Bondora it’s not active as some other P2P lending platforms.
Dealing with delinquent loans on Bondora isn’t easy. You may be asked to give the borrower a discount, which will seriously affect the value of your investment. You may also be able to change problem loans to Go&Grow investments. But once again, you will have to give a discount on the principle investment that you started with.
It’s really difficult to predict your returns unless you have been part of Bondora’s platform for a few years. Bondora rewards its users with much higher interest rates. However, you will have to bear a lot of risks to earn those higher rates as Bondora does not guarantee buyback on problem loans.
Without an efficient secondary market for loans, the investments made with Bondora will likely be held until they mature, or the borrower defaults. This is a big difference from investing in a bond fund, or with a bank. P2P lending offers much higher rates of return on your capital, but you need to be aware that the terms are very different as well.
Bondora for Borrowers
Applying for a loan with Bondora is a very straightforward process. As mentioned, Bondora offers unsecured loans, which means you won’t have to post anything as collateral to use the platform.
According to Bondora, any borrower will have to supply the following information (from Bondora):
- Personal information
- Contact information
- Sociodemographic data
- Employment information
- Income data
- Data on outstanding liabilities
- Supporting documentation
Once all that data is submitted to Bondora, it will screen you to see if your borrowing needs are compatible with its platform. You can borrow in many different ways, and Bondora offers loans from 500€ to 10000 €.
According to Bondora, borrowers can use loans to finance the following (from Bondora):
- a loan to start your own business;
- a travel loan (for the purchase of plane tickets or accommodation);
- a loan for education or training;
- loan for refinancing of more expensive loans;
- loan for the purchase of household appliances, electronics;
- loan for home furnishings, furniture purchase;
- loan for organizing birthday’s, an anniversary or wedding;
- a loan to cover health related expenses.
The interest rates on the loans that Bondora offers are in-line with other forms of unsecured credit. Borrowers can expect to pay between 17.95 % to 58.1% for a loan, depending on a number of factors.
As a lending service, Bondora falls somewhere between a bank and a high-interest debt and may be a good option depending on your financial needs.
With the lowest interest rate at nearly 18% per year, Bondora isn’t a cheap way to borrow. However, any unsecured line of credit will cost more than a secured line of credit, which should be the first choice for any borrower.
Do P2P Investments Make Sense for You?
P2P lending is a relatively new industry, and even veteran platforms like Bondora are barely a decade old. There hasn’t been a major global crisis since 2008, and this may create somewhat rosy statistics for these lending platforms.
That said, lending on a P2P basis is a great option for investors who want to make an investment in debt, and don’t want to deal with an intermediary that manages a loan portfolio at a profit. The key to P2P lending as an investment is understanding the terms that exist in the marketplace and creating a highly diverse portfolio.
It is a virtual certainty that at some point, a borrower will default on one of the loans that you invest in via a P2P platform (Bondora, or any of them), so it is vital that an investor understands how to spread their capital out over numerous loans.
The liquidity of the loans is also a factor, and this may or may not be a concern for you. If you need to have access to your capital at any time, P2P lending probably isn’t the way to go. On the other hand, if you have some investment capital that you don’t mind locking up for a few years, high-interest P2P loans could make sense.
Another thing to consider is the direction of global interest rates. It is unlikely that central banks will let interest rates rise from their present levels, which makes locking in rates that are above 10% highly attractive, as long as the borrowers can service the debt.
Bondora: The Rundown
Bondora has a huge amount of P2P investment options available which may present a good investment opportunity, depending on your goals, and risk tolerance. The platform is a better fit for investors that have a longer-term time horizon, and don’t need a lot of liquidity from their investments.
From a usage perspective, Bondora is very good. The interface is simple to understand, and investors should have no problem with the signup process, or depositing funds. Like many P2P platforms, Bondora is focused on the EEA and Switzerland, which support its business model.
Bondora – Pros and Cons
- Bondora website has a user-friendly and intuitive dashboard for users
- The platform has a wide range of options for P2P investments
- It is easy and fast to invest money, and also offers tools for in-depth analysis
- Bondora has pre-defined criteria that can help investors make choices quickly, or automate investments if desired
- Bondora does not offer a buyback guarantee
- Loans are not collateralized
- Bondora offers loans to borrowers who may not have many other options
A Solid P2P Lending Platform
Bondora has put together a great P2P lending platform that allows investors to earn high rates of interest on P2P loans. The bigger question is whether or not the kind of loans that Bondora offers are the right investment for you, which can’t be answered by this article.
It is worth remembering that most equity investments that fit into Modern Portfolio Theory (MPT) won’t generate a 10% return on an annual basis, which should put the risk/reward equation that P2P lending offers into perspective.
Bondora could be a good fit for investors that want to pump up their annual returns and don’t want to risk being exposed to an equity market crash.
Like any investment strategy, diversification is a key concept to use in your portfolio. Make sure to gain exposure to lots of loans, and don’t make concentrated investments in a handful of high-yielding debts.
If you want to learn more about how to get started with Bondora, just click here to visit its website.
Bondora is probably one of the best P2P lending platforms that deals in unsecured debts, and may be a great way to make your money work harder for you.