Valentin Kragelj

Valentin Kragelj

What Is Peer-To-Peer Lending and 6 Practical Reasons How to Succeed

What is peer-to-peer lending?

Peer-to-peer lending offers a modern option to traditional banking. Instead of needing to go through a bank, borrowers and lending institutions can be matched through a P2P loaning platform. Most of the customers are individuals seeking to secure an individual loan (for home improvements, purchasing a car and truck, combining financial obligations, etc.) or small businesses.

p2p explanation

On the other side, lenders are other individuals with money seeking a return, known as investors. The investors can pick the particular attributes of the loans they wish to invest in, selecting to restrict themselves to a specific threat level, type of loan, or location. Frequently investors can also restrict the quantity they purchase any single loan (for instance, a loan of 1000 € can be divided into 1000 € or 10 x 100 € or 100 x 10 € (or anything in between)), which enables risk diversification.

The P2P platform is what sits between the lenders and the borrowers, supplying simple to use marketplace for people with capital to provide to individuals needing it. There are lots of various platforms in presence, with varying features, currencies, interest rates, threat levels, and many other things besides.

6 reasons to use peer-to-peer lending

High returns

It’s simple. We invest money to get more money. With investing in P2P, one can easily get stable double-digits returns. It is always up to you, how aggressive you want to be – higher returns mean more risk, and vice versa. Compared to bank deposits, which yield zero interests, bonds that have a negative yield in many countries, and highly volatile stocks, I don’t think there is a reason to not include P2P into every person’s portfolio.

No fees or commissions

Almost all P2P platforms have zero fees. No fee for account opening, money depositing, investing in loans, taking money out, nothing. Compared to mutual funds that can take up to 5% per year? This is madness!


Another strong point of P2P investing is diversification. It’s up to each lender in what loans he/he will invest. Loans are of different types – personal loans, business loans, car loans, mortgage loans, witch different maturity, interest rates, country of the borrower, etc. etc. You can of course invest on different P2P platforms. Possibilities are really wide for investors.

Accounts are easy to open and manage

Creating an account is fully over-the-internet and takes of maximum 1 hour (5 minutes to create an account and provide a legal document, and 1h for the platform to check them). Likewise, managing your account doesn’t take hours each day. On most P2P platforms, you can use an auto-invest function, which will do the work for you – you just specify which loans you want to invest in, and click “start auto-invest”.

Predictable and regular cash flow

You can be sure that if you invest in loans with 12% and above interest rates, you will get approximately 1% of your investment per month (12% divided by 12 months). I said approximately, because some loans could default or the borrower could make a late payment. But overall, it’s a steady supply of free money. You can see this through my monthly income reports.

Low minimum investment amounts

You can invest as much as you want. Of course more money invested means higher returns.

Bonus point: sign-up bonuses

Many P2P platforms have sign-up bonuses. Iuvo Group has a 90 € free bonus, Mintos has a bonus of 0,5% of invested money, similarly Lendermarket with 1% of the invested money. Here are some nice bonuses that you can choose.


Of course there is no free lunch in financing and peer-to-peer lending is no different. Let’s examine some of the disadvantages:

  • Higher risk than a standard savings account. Higher returns mean higher risk, such is the law of financing. While it’s important to take this into account, you must also know that diversification provides some safety net against this risk.
  • Most P2P platforms are young and therefore vary in maturity. This is why it’s important to do your due diligence and review each platform you want to invest in. Some of the older and more reputable P2P platforms are Mintos, Iuvo Group, and Peerberry.
  • Possibly illiquid investment. If a platform does not have a secondary market (a place where you can sell your investments to other investors), your money is tied up for the duration of the loan. This disadvantage can be mitigated by investing in P2P platforms with a secondary market and investing a small amount in each loan, for example 10 €.
  • Unregulated market. Nowadays this is beginning to change, although I won’t deny that most P2P platforms are unregulated and there is no government protection. Yet. In my opinion, no big daddy protection is not necessarily a bad thing, but to each his own.


Peer-to-peer lending is a new way for individuals and small businesses to borrow money while providing investors hefty returns with high-interest rates. It is still considered wild west (read: unregulated), which is changing each day since P2P platforms are competing for investors and therefore want to provide as safe environment as possible. There are lots of ways for investors to mitigate his risk, mainly through diversification and doing his due diligence.

You can do your due diligence here, and see my passive income reports here.

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Valentin Kragelj

Heyo, my name is Valentin and I am a 29 year old investor from Slovenia.  I started investing in ETFs and P2P lending recently, and decided to share my path with you. Because sharing is caring. :)

P2P portfolio: 5100 €


Emergency: 2000 €


Passive income: 57 €

P2P platform XIRR
20,27 %
IUVO Group
12,53 %
12,52 %


All posts represent the opinion of the individual authors. takes no responsibility for any claims or statements made in these posts.