Here is how Lendermarket compares to similar platforms that I am invested in:
|Platform||Link||Target Rate (%)||My XIRR (%)||Status||Live Rating|
|Review||Variable||11.47%||CLOSED (to UK)||4/5|
What is Lendermarket?
Lendermarket is a relatively new P2P platform which was established in 2019. Their website describes themselves as a marketplace for investors to invest in Buyback Guranateed consumer loans issued in Europe. This puts them into much the same territory as firms such as Bondora, Twino or Mintos – all of which has been operating for some time. Typically loans on these platforms tend to be for shorter durations but also pay at higher rates reflecting the riskiness. A Buyback Guarantee appears to knock out a lot of this downside risk, but something to bear in mind is that it does not eliminate counterparty risk. Lendermarket are registered in Ireland although it appears that none of the loans it makes are in this country.
A difference between Lendermarket and other platforms is that it is a sister company of a loan originator – Creditstar. Creditstar loans have appeared on Mintos in the past, so setting up in this way is perhaps a way for them to save on fees. Thus their track record extends back a little bit further than the beginning of the Lendermarket site. The site is also set up such that if it were to become successful, it could offer loans from other originators. With Mintos and Twino shutting their doors to UK investors, this may be of interest to some.
Here is a list of Lendermarket features:
|Investment Type||Personal Loans|
|Minimum Investment||10 EUR|
|Cash Drag||Very little|
|Provision Fund?||Buyback Guarantee|
|Available in ISA?||No|
|Active on forum?||No|
|Sign-up offers?||1% of total invested amount in first 30 days|
Lendermarket Sign Up Offer
Lendermarket have a straighforward modest sign-up offer. They offer 1% cashback of all your investments inside the first 30 days, capped at a maximum of 3000 EUR. Funds need to be invested into loans and not merely deposited into the account.
To find out more and to sign up, please see here.
Is Lendermarket profitable?
Lendermarket is an trading name of Lendermarket Limited. This company is registered in Ireland and more details such as their filings do not seem to be very accessible. On their website, they publish the accounts of Creditstar Group. This seems to have some relevance as the Lendermarket website simply is an interface for offering investors their loans. Additionally, the strength of Creditstar Group also has to be taken into account as this the company that honours buyback guarantees.
The last accounts of Creditstar Group cover the period to 31 December 2019. These accounts reveal a large and growing business, having written over 140m EUR of loans in that period – an increase of 35M on the year beforehand. This was also done profitably and profits increasd to 5.8M EUR, up from 3.3M the year beforehand.
The balance sheet is more complicated than others. Creditstar fund their loans mainly by borrowing themselves with a mixture of bond issues and borrowings. These are at relatively high interest; with total debt at roughly 100M EUR there was 10M EUR payable in interest. However, the company charges much higher interest rates to their customers; income from this was 32M EUR. That total does not include bad debt; some 6.3M EUR was written off – unsurprising given how their loans tend to be the higher risk categories.
These accounts do not cover the pandemic so it will be interesting to see how resilient the business is.
Lendermarket Operating Model
The Lendermarket website should be familiar to anyone that has used the Mintos site before; it runs on similar lines. Registration is open, even to people in the UK. You will need to verify your account and answer a short questionnaire to determine your suitability. After you have been verified you can fund your account by depositing funds. Depositing here is a little tricky for UK users as the site does not take debit cards, the currency is EUR and Lendermarket’s bank does not accept SWIFT and only SEPA payments. The website also dislikes transfers from services such as TransferWise.
Once your account has been funded you will be able to invest into loans. Sensibly, the interface at Lendermarket works in pretty much the same way as it does at Twino or Mintos, albeit all loans are from one provider (Creditstar) and in one currency – EUR. There are two basic choices for investor. Auto invest allows you to create a hands-off portfolio of loans. There are several options to specify which loans you want to invest in, from interest rate, country, remaining term and the amount.
The other option is to simply manually invest in loans. Creditstar are a large provider and typically there are thousands of loans available at any one time. Loans can vary in length of time, from a few months to a few years. Interest rates are high – anywhere between 12% and 14%, which reflects that these are high-risk loans. There is very little information given on the final borrower or even the purpose of the funds.
Currently all loans come with a Buyback Guarantee. This works in much the same way as similar sites in that the loan and interest are bought back if they become more than 60 days late. This covers both the principal and accrued interest. As with all guarantees, this is only as strong as the party that is making the guarantee. As seen above from their financial statements Creditstar are in a strong position financially but this does not mean it will always be the case.
A difference with other platforms is that there is no secondary market for loans. Once you have invested there is no way to exit early and you have to hold the loan to maturity. This is less of a problem given that some loans have very short maturity dates.
How are funds protected?
The main form of protection for funds is the Buyback Guarantee offered by Creditstar which buys back loans after they become more than 60 days late. In theory, this protects investors from any risks associated with non-payment of the loans. This is because the buyback repays both capital and interest. In practice, the buyback guarantee is only as good as the party that are making it. It can be possible to infer that currently Creditstar are performing well from their accounts, but this may not be the case forever.
With regards to uninvested cash this is not covered by any investor compensation scheme. There is a degree of uncertainty with regards to winding-down procedures. The assumption would be that Creditstar would simply takeover the running of the platform, but the biggest risk to the platform would be the failure of Creditstar itself.
Lendermarket Review: Pros
There are some things to like about Lendermarket:
- Hands-off operation: The auto-invest method works smoothly and with a large flow of loans there is very little drag on cash.
- Low minimum investment: Loans on Lendermarket are on the smaller side and you can invest from as little as 10 EUR into them.
- High interest rates protected with Buyback: After acounting for the buyback guarantee, loan rates are in the region of 12-15% which is comparable to similar platforms.
- Backed by larger company: The proposition is stronger than a standalone business. Creditstar seem currently in good health and as an established loan provider across several European countries offer a steady flow of loans.
Lendermarket Review: Cons
There are also some things to be cautious of:
- Lender concentration risk: The site only features loans from one provider: Creditstar. Whilst they are to different individuals, it is the same counterparty so you are vulnerable if anything happens to Creditstar.
- Lack of supporting information: Loans carry no supplementary information on borrowers. Similarly, the Lendermarket site is quite scant when it comes to details of who their team are and what the wind-down procedure is.
- No secondary market: It is not possible to exit loans early or price them at a discount to sell quickly. For those which do go late, you have to wait 60 days before they are redeemed.
- Lesser known jurisdiction: Creditstar are regulated in Estonia which potentially could have less stringent oversights on accounting.
Lendermarket Review: Conclusion
On the face of it, Lendermarket makes a lot of sense for Creditstar. Rather than pay another site to distribute their loans, they have cut out the middleman and just decided to set up shop for themselves. So whilst the site is quite new, effectively it has less of the problems that a start-up would face as the loan flow is already established. Notably, these savings have not passed on to the investors as the rates are pretty much the same as seen elsewhere. Some caution may be needed in that investing here has a concentrated counterparty risk. The buyback guarantee that underpins the rationale for investment at these rates also is only as good as the company making it and may not be available at all times.
Disclaimer: This Lendermarket review represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) in the same way bank deposits are. There are no guarantees that you will receive the returns advertised (or even a return at all).