With the traditional lending space tightening its grip on who it issues loans to – peer-to-peer lending sites have grown to new heights in recent years. Not only do P2P platforms allow you to obtain financing at a more competitive rate of interest, but those of you looking to earn passive income can do so by lending out money to borrowers.
Moreover, those of you with a less than ideal credit profile also stand a much better chance of being approved, albeit, the underlying APR will need to mirror your creditworthiness. One such example of a P2P lending site that caters to both borrowers and investors is that of Monestro.
The EU-based platform allows you to borrow between €300 and €4,000, with terms ranging from 3 months to 2 years. As an investor, you’ll have the chance to choose which loans you want to back, and interest yields average a rather juicy 20% annually.
With that said, there are heaps of P2P lending sites now active in the market – so whether you’re an investor or borrower, you need to explore whether Monestro is right for you. As such, we would suggest reading our in-depth Monestro review.
We cover everything you need to know as an investor or borrower, such as interest rates, yields, eligibility, repayments, safety, and more.
Monestro at a Glance
- 1 Monestro at a Glance
- 2 What is Monestro?
- 3 How Does Monestro Work?
- 4 Using Monestro to Borrow Money
- 5 Monestro as an Investor – Make Passive Income
- 6 Customer Support at Monestro
- 7 Monestro Review: The Verdict?
- 8 Monestro
- 9 Pros
- 10 Cons
|Monestro - Visit|
|Product Type||Peer to Peer Lending|
|Available to||European Union & EEA|
What is Monestro?
Monestro is a peer-to-peer lending site that strives to match borrowers with those that wish to earn passive income. As such, none of the loans facilitated on the platform are backed by the company itself. Instead, all loans are funded by everyday investors that are looking to make a return on their money.
From the perspective of borrowers, you will be able to apply for a loan from just €300, up to a maximum of €4,000. Loan terms start at 3 months, with the longest term capped at 2 years.
For those of you that are interested in using Monestro as an investor, annual returns sit between 6% and 39%. With that said, Monestro notes that the average yield on loans is 20%. You can invest from just €10 per loan, meaning that you have the chance to diversify by holding a basket that consists of hundreds of loans.
In terms of the fundamentals, Monestro is based in Estonia, and the platform was launched in 2014. Since then, the platform has successfully acquired a credit intermediary license – which was issued by the Estonian Financial Supervision Authority in 2016 (EFSA).
Although the EFSA is relatively unknown in the lending regulatory arena, Estonia is an EU member state, meaning that the license does hold an element of weight.
On a side note, it is worth mentioning that the Monestro website looks extremely basic. There are a number of spelling and grammatical errors throughout the site, which is somewhat unprofessional.
However, on top of its credit intermediary license, the company has been trading for over 6 years now, so it’s reasonable to label the platform as an established P2P site.
How Does Monestro Work?
Monestro is a P2P lending website in its truest form. By this, we mean that borrowers are matched with investors, and investors matched with borrowers. However, understanding how Monestro works will depend on whether you are looking to use the website to raise capital, or make passive income.
As such, we’ve split our review to cover both angles.
Using Monestro to Borrow Money
If you’re an everyday consumer looking to raise capital in the form of a loan, you might be considering a site like Monestro because you’ve been turned away from traditional lenders. You’re not alone in this respect, as consumer loans have been slowly but surely drying up in recent years – especially for those that have a less than ideal credit file.
Nevertheless, Monestro is suitable for credit profiles of all shapes and sizes. In fact, this is evident when you first visit the platform, as its broad APR range goes from 6%, up to a whopping 39%.
Initiating the Loan Application
When you first head over to the Monestro website, you will need to open an account. The information asked of you will mirror that of a traditional online loan application.
As such, you’ll need to provide the following personal information:
- First and Last Name
- Country of Residence
- Home Address
- Date of Birth
- Employment Status
- National ID Number
- Contact Details
Once Monestro knows who you are, you will then be able to enter your loan requirements. You will need to state the following:
- How much you need to borrow (€300 – €4,000)
- The maximum interest rate that you wish to pay
- How long you need to borrow the funds for (3-24 months)
- The monthly date you wish to make your repayments
- When you want to receive
- Reason for taking out the loan
As you will see from the above, you get to specify the maximum interest rate that you are willing to pay. You need to be realistic with the stated rate, as investors will decide whether or not they think the loan package offers good value.
Proof of Income
At this stage of our review, you might be thinking that a Monestro loan sounds far too easy, as investors would not be able to verify the financial standing and creditworthiness of the borrower. With that said, all Monestro loan applicants are required to provide 6 months worth of certified bank statements.
The bank statements must show your monthly salary being paid in, as well as detail your outgoing transactions. This allows the platform to gauge whether or not you are suitable for a loan, and at what risk profile.
Submitting Your Application for Auction
Once you have provided the necessary bank statements, Monestro will then post your loan requirement for auction. In Layman’s Terms, this means that investors will be able to view your loan request, and decide whether or not they wish to make a contribution.
Investors won’t be able to see your personal information (full name, address, etc.), but they will get an overview of your creditworthiness. Investors will also have the option of bidding on your loan, meaning that they might ask for a more favourable rate of return.
Receiving the Funds
If your loan application is funded in full, you will then need to sign a digital loan agreement. This outlines the terms of your loan, as well as when you need to make your repayments. This should mirror the requirements you outlined when making the application, although the interest rate might differ depending on investor demand.
Once everything is finalized, you will have the loan funds deposited into your bank account. You then need to start making preparations for repaying the money.
Repaying Your Loan
When it comes to repaying your loan, you will need to do this on the same date of each month – until the loan is repaid in full. The specific payment amount will always be the same.
There is no option to engage in automated payments, so you will need to manually transfer the funds in good time. To do this, you’ll need to perform a transfer in Euros directly into the bank account controlled by Monestro.
Monestro as an Investor – Make Passive Income
If you’re here reading this review as an investor, you’re likely attracted to the high annualized yields that sites like Monestro can offer. But, you still need to have an understanding of how the investment process works, as well as the underlying risks – so we’ve broken down the key points below.
In order to use Monestro as an investor, you need to be a citizen or permanent resident within the European Union, European Economic Area or Switzerland.
You also need to be aged at least 18 years old.
Much in the same way as any other P2P lending site in the space, Monestro requires all investors to open an account. This will require you to enter a range of personal information, such as your full name, nationality, home address, date of birth, and contact details. You will also be asked to verify your identity – as per anti-money laundering laws. You can do this by uploading a clear copy of your passport.
The deposit process is somewhat cumbersome at Monestro, as you will be required to perform a bank-to-bank transfer. This will be to the bank account controlled by Monestro, so the payment needs to arrive in Euros.
If you are using the SEPA network to initiate the transfer, the funds should arrive in 1-2 working days. Once they do – and Monestro credits your account, you are then able to start making investments.
The Monestro platform gives you a lot of control over where your money goes, not least because of the bidding system that it uses. You will get to view key information linked to the loan application – such as:
- How much the user needs to borrow
- The country that the borrower is located in
- The maximum interest rate the borrower wants to pay
- How long the borrower needs to repay the money
- The creditworthiness of the borrower
The information provided should be sufficient enough for you to make a risk assessment on the viability of the loan.
- If you’re happy with the terms, you can contribute a minimum of €10 into the loan
- If you want more favourable terms, you can place a bid
If you proceed to invest – or your bid is accepted by the portal, Monestro will then debit your account. Once the loan has been funded in full by other members of the site, the loan agreement comes into force.
Getting Your Money Back
The repayment process works largely the same as any other P2P lending site active in the space. You will have had the opportunity to review the repayment terms when you invested in the loan, so you should have a full understanding of:
- What date of the month the borrower will make their repayments
- How many repayments are to be made
- The exact size of each repayment
All being well, you will then receive your monthly repayments as and when they are made by the borrower. The funds will be paid into your Monestro cash account.
You can then withdraw the funds out to your personal bank account, or alternatively, utilize the auto invest feature. If opting for the latter, this will allow you to increase your yields further via compound interest.
The specific yield at Monestro will vary depending on the credit profile of the borrower. This can be as low as 6%, or as high as 39% for super high-risk loans.
Monestro notes that the average annualized yield at the platform is 20% per year, which is incredibly high. As you’ll know as a seasoned investor, this also comes with a high amount of risk.
As we briefly noted above, Monestro allows you to automatically reinvest the loan repayments that you receive. For example, let’s say that you receive €200 in interest payments throughout the month.
Ordinally, the money would just be left in your cash account, so you’d need to decide whether to withdraw it out or manually invest it in a new loan.
However, by activating the auto invest feature, your €200 would be distributed into new loans automatically. You would get to choose the specific loan parameters, so that Monestro knows the types of loans you wish to invest in.
Late Payments and Defaults
The golden question – as is the case with all P2P investment sites, is what happens in the event of a late payment or worse – an outright default. Firstly – and perhaps most importantly, Monestro does not offer a Buyback Guarantee. For those unaware, this is a guarantee offered by a number of leading P2P sites that covers investors in the event of a default.
The platform would subsequently purchase the loan agreement from you, and return your original investment plus any applicable interest. However, this does not exist at Monestro. As a result, any defaults encountered on your investments will result in an outright loss of money.
Here is what Monestro notes on its platform:
The portal administrator makes all reasonable efforts to recover the debt, but cannot guarantee the outcome of the debt collection procedure nor recovery of the debt, and is not responsible for possible loan losses of the lender.
In Layman’s Terms, this validates the position we have outlined above, insofar that defaults will not be covered by Monestro. With that said, the platform will attempt to recover the money through standard debt recovery practices. Even if the platform is successful in this respect, you’ll still likely get less than you invested when you factor in the recovery fees.
The only saving grace here is that -as per the credit intermediary license that Monestro holds, the platform is required to keep customer funds in segregated bank accounts. This means that were Monestro itself to go out of business, your money should be ring-fenced.
Mitigating the Risks at Monestro
The key point to remember with P2P lending sites like Monestro is that you are looking to chase higher-than-average returns on your investment. Sure, you’ll be netting annual gains of 20% or more, but this in itself comes with an extraordinary amount of risk.
As such, if you do proceed to invest with the platform, you should ensure that you diversify as much as possible. You can do this with ease at Monestro in two key ways. Firstly, you can invest from just €10 per loan agreement on the platform.
If, for example, you were to deposit €5,000 at the site, this would allow you to hold an investment basket that consists of 500 individual loans. In doing so, you would not feel the effects on an individual default in the same way, had you not diversified.
Secondly, you can also diversify at Monestro by investing in loan agreements of varying risk levels. For example, a risk-averse investor might opt for 70% of loans at an APR rate of 10% or less, 20% at rates of between 10-20%, and the remainder at 20% or more.
Customer Support at Monestro
If you need to contact a member of the support team at Monestro – you can do so via the platform’s live chat facility. You can also raise a support ticket if the query is related to an outstanding loan. There is no telephone support offered by Monestro.
Monestro Review: The Verdict?
In summary – whether you’re a borrower or an investor, Monestro is an option well worth considering. As a borrower, you will be able to apply for a loan of between €300 and €4,000 – and repay the money over a 3-24 month term. As an investor, average annualized returns made at the platform amount to 20%.
Although this is indeed juicy, you need to make some considerations regarding the high-risk nature of the investment. Crucially, if you do proceed to invest money at Monestro, just make sure that you diversify as best as possible.