This post explains ways for non-European investors to invest in European P2P Lending platforms such as Mintos, Grupeer and
A number of non-Europeans, including US citizens, have asked me whether it is possible for them to invest in European P2P Lending Platforms. I collected some information and a friend of mine tried it – and it worked.
Why European P2P Lending?
First of all, why would one want to invest in the European P2P Lending Market? Let’s start with a comparison of European and US peer-to-peer lending markets:
|European P2P Lending Platforms 🇪🇺:|
– Interest rates: 10 – 12 % / year
– Offer BuyBack Guarantees
– No platform fees
– Investments from 10 EUR
|US P2P Lending Platforms 🇺🇸:|
– Interest rates: 3.5 – 9 % / year
– Often charge fees
– Often only accept accredited investors
– Restricted to US citizens
European P2P Lending Platforms, such as Mintos, Grupeer, and
In comparison, American P2P Lending Platforms, such as Upstart.com, Prosper.com, and LendingClub.com are offering much lower interest rates, ranging somewhere between 3.5 and 9 %. In addition, platforms often charge fees (Prosper, Lending Club), and investors often have to be accredited investors. To become that, you either have to earn $200,000 / year or you have a net worth over $1 million (Source)
As such, European platforms are providing a very interesting investment opportunity both for Europeans and for non-European investors.
So, can I invest as a non-EU citizen?
The answer is: It depends. We contacted Mintos, Grupeer and
- Mintos: We accept US citizens and non-European investors but it depends on the county of residence.
- Grupeer: Unfortunately, at the moment we do not provide our services to the citizens of the US.
Swaper: Investors have to be a resident of a European Economic Area (EEA) country and have a bank account in a bank situated in an EEA country? An individual is recognized as a resident if he or she is a citizen, has a residence permit or is registered as a taxpayer in an EEA country.
The Experiment: We tried it!
I shared this information with an American hobby investor and she tried signing up and investing on Mintos — and it worked! The registering and verification was super easy and she could do it with her non-EU passport. The transfer of funds into the account took less than 2 days and she is now investing in P2P loans. Fantastic!
But first, let’s talk about why one would want to invest in a European P2P Lending platform.
What are the
benefits of the European P2P lending market?
- Higher interest rates: The European P2P Lending market is offering interest rates that by far exceed interest rates paid by other platforms, including US P2P lending platforms.
- BuyBack Guarantee: Many European platforms are offering BuyBack guarantees in case the borrower delays payments or defaults. A BuyBack guarantee is a guarantee that the loan originator steps in in such cases and repays the loan and interest rate. As an investor, this takes out the risk of underperforming loans, which is really great.
The largenumber of European P2P Lending platforms allows to diversify one’s investment portfolio by distributing investments across multiple platforms. Following the principle of not placing all eggs in one basket, I am currently investing in 3 P2P Lending platforms, which works great.
- Currency Diversification: The EUR is a strong and stable currency. The EU is the world’s largest economy and the world’s largest trading block. If your savings are in US dollars, converting and investing them in EUR makes great sense. This can be easily and cheaply done with Transferwise. See below.
Steps: How to start investing as a non-European investor.
Risks of Investing in a Eur
opean P2P Lending Platform as a non-European investor
Just like any other high-yield investment, P2P Lending does not come risk-free. Being rewarded with an annual return of 10, 11, or even 12 percent, means accepting and preparing for certain risks. Here are some of the risks that you should be aware of before creating an account.
1. Loan originators insolvency
Most European P2P Lending platforms are offering BuyBack Guarantee on their loans. That means that the loan originator guarantees to buy back loans that are 60 or more days late. This greatly reduces the risk of an investor losing money if the borrower does not repay their loan.
While the loan originator is legally obliged to buy back the loan and to honor its buyback guarantee commitment, in case the loan originator itself becomes insolvent or completely goes out of business, there’s a risk for investors to lose some of their invested amounts. While this is a very rare case, it happened with the loan originator Eurocent in 2018. In such cases, P2P marketplaces (e.g. Mintos,
The best way to avoid the risk of loan originator insolvency is to select only loan originators with good ratings as wells to diversify among as many loan originators as possible.
2. Servicing risk: Platform insolvency
Given the pass-through nature of P2P Lending platforms, a small servicing risk exists that a P2P Lending Platform could go out of business. However, if this would happen, the money is NOT gone and the investor can claim directly from the loan originator as the loan originator still has liabilities towards all investors that made investments to their projects. All claims are bound between the investor and the loan originator.
3. P2P lending during a global recession is somewhat unpredictable
Considering that P2P Lending and Marketplace lending is a rather new type of investment, it is nearly impossible to predict how loans and platforms will perform during a global economic recession. Generally, loans tend to perform worse during recessions (delayed repayment, higher default rates) but whether and how this will affect the performance of P2P loans has yet to be experienced.
4. Limited liquidity
Most platforms offer secondary markets which allow investors to sell already funded loans after the repayment period has begun. Secondary markets allow lenders to exit loans early in case they would like to liquidate their investment, which is great for their liquidity
While secondary markets work great during normal times, with ample supply and demand of loans, once can only imagine how this will change if a loan originator is at the brink of insolvency. In such situations, most investors will try to sell their investments on the secondary market, likely offering steep discounts, but it might be hard to find interested investors and investors might experience limited liquidity.
Money earned through P2P Lending falls under the taxation laws of the country that the investor is a tax resident of. Taxation of P2P Lending income is different in every country and I am not a fiscal advisor and won’t be able to provide any financial or fiscal advice here. The best place for investors to look at is their latest domestic tax legislation.
Important to know is that all P2P Lending platforms allow users to download a detailed tax report from their investment portfolio to submit to tax authorities in the country they are a tax resident of. This tax report is mostly a simple PDF document that includes all crucial numbers on interest income and investment portfolio size and makes filing taxes much easier.
Thanks for reading! I hope this post highlighted ways for non-European investors (incl. US citizens) to invest in European P2P Lending platforms and European P2P loans. Please feel free to reach out or comment below if you have any questions or feedback. Also, please follow me on Facebook and Twitter for updated news on P2P Lending and my journey to financial freedom. Also, check out my experience investing in Mintos, Grupeer, and