P2P Investments in Euros vs. Traditional Investment Options: Which is Right for You?

In today's fast-paced financial world, investors have many options. Peer-to-peer (P2P) lending has gained significant popularity as an alternative investment avenue, particularly in euros. 

In this article, we'll explore the differences between P2P lending in euros and traditional investments, analyze the risk and return factors, discuss important considerations when choosing an investment option, highlight some top euro peer-to-peer lending platforms and conventional investment options, and provide guidance on getting started with either approach.

Euro P2P Lending vs. Traditional Investments

So, what is peer to peer lending? P2P lending, or peer to peer lending investing, involves individuals lending money directly to borrowers through online platforms, bypassing traditional financial institutions. P2P lending has gained traction in the eurozone due to its potential for higher returns than conventional investment options. Traditional investments, on the other hand, typically involve investing in stocks, bonds, mutual funds, or real estate through established financial institutions.

Risk and Return Analysis

Regarding risk and return, both P2P lending and traditional investments have their own characteristics. P2P lending offers potentially higher returns but carries a higher risk level than conventional investments. The risk in P2P lending arises from the possibility of borrower defaults, economic downturns, or platform risks. Although generally considered more stable, traditional assets are also subject to market volatility and economic conditions. It is crucial for investors to assess their risk tolerance and diversify their investments accordingly carefully.

Factors to Consider When Choosing an Investment Option

Several factors should be considered when deciding between P2P lending and traditional investments. These include risk appetite, desired return on investment, investment timeframe, liquidity requirements, and regulatory considerations. P2P lending may appeal to investors seeking higher returns and willing to accept a higher risk level. At the same time, traditional investments may be favored by those looking for more stability and regulatory oversight. Investors should evaluate their individual circumstances and investment goals before making a decision.

Top Euro P2P Lending Sites and Traditional Investment Options

Peer-to-Peer investing in Europe is becoming increasingly available for retail investors. There are currently 175 P2P lending platforms operating in Europe. 88 of the platforms offer the feature to invest automatically and 62 offer a secondary market to exit investments early. One of the platforms is only available for institutional investors. 

P2P lending in Europe allows you to invest directly in small business debt and invoices & receivables from businesses, loan originator debt, personal debt to citizens, agriculture & farming, crypto lending, and green energy.

The projected returns for european platforms range from 5% to 10%+.

The most common type of Peer-to-Peer lending in Europe is offering small business debt to retail investors.

Lonvest

Lonvest is a peer-to-peer lending platform that facilitates lending and borrowing activities in the European market, specifically focusing on investments in Euro. The platform enables individuals to directly connect with borrowers and investors, bypassing traditional banking institutions.

One notable advantage of Lonvest is its exclusive emphasis on Euro investments, making it an ideal choice for those seeking European-based investment opportunities. By lending funds in Euro, individuals can provide financial assistance to borrowers in need, who subsequently repay the borrowed amount along with accrued interest. This lending process allows individuals to act as their own lending institutions effectively.

Alternatively, Lonvest also provides an avenue for individuals with surplus Euro funds to invest and grow their capital. An investor can carefully select borrowers to lend to, determining the loan amount based on personal preferences and risk tolerance. Diversifying investments across multiple borrowers is encouraged to mitigate risks and enhance portfolio stability.

Mintos

Mintos is the leading global platform for investing in personal loans with more than €8.5 billion worth of loans funded since launching in 2015. An investor can buy fractional ownership in debt notes containing 6 to 20 loans from one of the platform's partnering 60+ loan originators.

At Mintos, you can make EUR-denominated investments starting from €10. You can also set up an auto-invest feature and buy and sell loans on a secondary market.

Mintos separates investors’ funds from the platform company assets but doesn’t have a wind-down plan in place to ensure minimal damage in case the platform goes out of business. 

Esketit

Esketit is a peer-to-peer lending platform from Ireland. Esketit serves as an online community for investing in loan originator debt starting at €10, and enables borrowers to receive funding directly from investors. The investments are denominated in EUR and are available for retails investors. The company behind the platform is Esketit Platform Limited which was founded in 2020 with its headquarters in Dublin, Ireland.

Investors can re-purchase short-term personal loans (or payday loans) from loan originators based in five countries. Loan amounts don’t exceed €1,000 and can mature in up to 60 days. All deals are covered with a 60-day buyback guarante.

Investors can use an auto-invest feature and buy and sell investments at a secondary market. Esketit also offers to buy back loans from investors with a 1% discount for faster liquidity.

Lendermarket

Lendermarket is a peer-to-peer lending platform from Ireland. Lendermarket serves as an online community for investing in loan originator debt starting at €10, and enables borrowers to receive funding directly from investors. The investments are denominated in EUR and are available for retails investors. The company behind the platform is Lendermarket Limited which was founded in 2016 with its headquarters in Dublin, Ireland.

Lendermarket offers short-term personal loans (microloans or payday loans) from Creditstar Group’s subsidiaries in seven European countries. Most loans mature in just 30 days, although some long-term options are available (up to even seven years). Loan volumes range from as little as €100 up to several thousand. Investments are unsecured, but the platform offers a 60-day buyback guarantee on all deals.

How to Get Started with Euro P2P Lending Investing or Traditional Investments

Investors can follow a few simple steps to get started with euro P2P lending. 

1. Firstly, they should research and select a reputable P2P lending platform that aligns with their investment goals. 

2. Next, they should create an account, complete any necessary verification processes, and allocate funds for investment. 

3. Diversifying investments across multiple loans and monitoring the portfolio regularly is essential to mitigate risk and maximize returns.

Individuals can approach a trusted financial institution or investment advisor for traditional investments. They should discuss their investment objectives, risk tolerance, and desired asset allocation. The advisor can then guide them in selecting appropriate investment products and help create a well-rounded portfolio that suits their needs.

Euro P2P lending and traditional investments offer distinct advantages and considerations for investors. P2P investing presents an opportunity for potentially higher returns but carries higher risks, while traditional investments provide stability and regulatory oversight. By assessing individual risk tolerance, return expectations, and investment goals, investors can make an informed choice between these options. Regardless of the chosen path, diversification and regular monitoring are crucial for success in the investment journey.

Conclusion

The decision between P2P lending in euros and traditional investments ultimately depends on an investor's risk appetite, return expectations, investment timeframe, liquidity requirements, and regulatory considerations. P2P lending in euros offers the potential for higher returns.

Diversification and regular monitoring are crucial for success. Investors should carefully assess their risk tolerance, conduct thorough research, and stay informed about the market to make informed investment decisions. With the right approach and understanding of their investment preferences, European investors can navigate the options available to them and embark on a rewarding investment journey.