Are P2P loans worthwhile in times of high inflation?

With inflation currently so high, are P2P loans, which often carry interest rates of 6-12% per year, still worthwhile? If so, the question remains as to which P2P loans are particularly attractive in times like these and which investors should steer clear of. This article will answer these questions.

The massive rate of inflation in Europe

Electricity, gas, petrol, housing, food, holidays… – everything is getting more expensive! This naturally leads some investors to ask themselves: ‘Do P2P loans still make sense in my portfolio?’

This question is entirely justified. This is because real interest rates also fall during periods of high inflation. With the current massive inflation rate in Germany of 7.5%, this often even turns out to be negative.

With an already high inflation rate of 7.5%, Germany is still below the European average – due to measures such as the 9-euro ticket, petrol discounts and the like. The European average is a whopping 8.9%, which is miles away from the ECB’s target of 2%.

I doubt that we will reach this normal value in the next two years and have to get used to this new level of inflation. At least for the time being.

Are P2P loans worthwhile when inflation is high?

Although the current rate of inflation does not yet constitute hyperinflation – which is only reached at an inflation rate of 50% – the current level is still having a significant impact on P2P lending. Let’s take a closer look at what these effects are.

The weak euro

Geopolitical developments are also not leaving the euro unscathed. The euro is currently collapsing, which is obviously not good for investors who invest in this currency and live outside the euro area.

Compared to the US dollar, the euro has fallen by as much as 12% in the space of a year. This is why more and more investors are turning away from the euro and investing instead in US bonds, which are currently much more attractive.

Compared to the Swiss franc, a similar trend can be seen. Here, too, the euro has lost a whopping 9% of its value within a year. This is leading many investors to question whether the Swiss franc can serve as protection against inflation.

In addition, more than €2.9 trillion was parked in current and fixed-term deposit accounts in Germany last year. This is an enormous sum, considering that no interest is paid on it, despite the current high inflation rate of 7.5 %.

The question now is: to what extent can P2P lending be an option in this situation – or is it not suitable at all?

When are P2P loans attractive?

The basis of a good portfolio should always consist of real assets, i.e. shares, ETFs or real estate. P2P loans or collectibles are ideally only a supplement to this. Nevertheless, P2P loans can be the most attractive option for investors, especially in challenging market phases.

The fact that P2P loans can be an interesting option at the moment is primarily due to a lack of alternatives. This is because real interest rates are currently negative almost across the board, be it for shares, ETFs or cryptos. With P2P loans, investors can buck this trend in some cases and achieve a positive return.

In 2019, before the coronavirus pandemic and high inflation, investors were able to earn real interest rates of around 5.35% on Bondora Go & Grow. At that time, inflation in Germany was 1.4%.

Two years later, in 2021, interest rates on Bondora also fell due to higher inflation of 3.1%. This meant that investors only received 3.65% interest on their investments.

If we apply this scenario to 2022, investors would even incur a negative return of -0.75% at the current inflation rate of 7.5% and constant interest rates of 6.75%.

With Bondora Go & Grow Unlimited, the real return is even worse. Due to the 4% interest rate that investors receive here, the real return is currently -3.5%.

So it depends very much on how much risk you are willing to take as an investor. But it is currently becoming more important than ever to take risks, otherwise you will in most cases lose out on a negative return on your investments.

Let’s take a look at P2P loans that are currently worth investing in and those that are not. The following list is a personal opinion and not investment advice.

Option 1: Moncera

The P2P lending platform Moncera belongs to the Placet Group. Investors receive 7% interest here for a term of 14 months. For a term of 2.5 years, this interest rate increases to 9%. However, if we assume that inflation will continue to rise in the near future, investors will earn a negative return even at 9% interest. For this reason, Moncera is not currently recommended.

78/100

Points

7.25% - 8.33% interest credited daily

Available again quickly

€5 + 0.25% extra bonus through our link

TO THE PROVIDER*

Option 2: Swaper

Swaper offers its investors 14-16% real interest, which is significantly more than Moncera. The terms are also considerably shorter here. The term on Swaper is 30-60 days.

A short credit period is particularly advantageous in the current market environment, as it allows loans to be quickly adjusted for inflation. This means that if the base rate rises, the interest rates for short-term loans can also be raised – and investors benefit from this. Swaper can therefore definitely be an attractive option for investors.

76/100

Points

Return: 14% interest

Investors: over 5,000

Only with this link: 2% bonus interest

TO THE PROVIDER*

Option 3: Income Marketplace

Another interesting option is the Income Marketplace. I am personally convinced by the platform and am using it more and more. I currently have around €1,240 invested in a total of 248 loans with an average term of 57 days.

The comparatively short term of just under 60 days makes Income Marketplace an attractive alternative. At the same time, Income Marketplace scores with its ‘cash flow buffer’ – a buyback guarantee from the provider.

Should a lender become insolvent, the portfolio will be taken over by Income Marketplace. Such guarantees are usually excluded by other P2P lending platforms. How well this cash flow buffer ultimately works remains to be seen in the event of the first bankruptcies.

The control and security that investors have over their investments are the reason why I will soon be investing more money in the Income Marketplace than in the market leader Mintos. This is therefore an attractive option for me during the current high inflation.

59/100

Points

Return: 12% interest.

Investors: Over 3,000

1 % Bonus auf Ihre Investition

TO THE PROVIDER*

Option 4: Estateguru

Another good option in the ongoing crisis is Estateguru, the platform for property loans. Because: I assume that property will continue to be a lucrative asset.

The reason for this assessment lies in the different development of key interest rates in Europe and the US. In my opinion, the ECB will not raise interest rates as much as the Fed, which is currently acting very aggressively.

In Europe, the situation is different. Many southern European countries have significantly higher debt levels than the US. At the same time, these countries do not have the dollar as a global currency support, but rather the currently somewhat weaker euro. Therefore, interest rates in Europe should rise less sharply than in the US and, accordingly, real estate should perform better.

The 11-12% interest rate with a short term of 1.5 to 2 years makes Estateguru an attractive platform for me, and I will continue to invest more and more in the near future. I currently have around €7,700 invested in first-ranking mortgages and I am very satisfied with the current performance.

60/100

Points

Return: 10.5% interest

Investors: over 133,000

0.5% bonus on investments in the first 90 days.

TO THE PROVIDER*

Option 5: Mintos

Mintos has been considered the market leader among P2P lending platforms for some time. The provider has recently started offering the first property loans, but with an extremely modest interest rate of 5.5 per cent. This is very little considering the current inflation rate of 7.5 per cent.

But the real shock is the term. This is an incredible 18 years! I am definitely not investing here. Nor do the Finclusion loans in Kenya, with a term of 8 years and 13% interest, represent an option for me.

Given the high risk, I only invest in loans with a short term, which I can quickly withdraw from. In the current interest rate environment, these are loans with a maximum term of two years.

Nevertheless, I will continue to invest on Mintos, but I will not increase my investments for the time being due to the modest redemptions. So I will stick with my consumer loans with a term of 30-60 days, which earn me interest of around 13%.

75/100

Points

Return: 10.5% interest

Investors: over 500,000

Largest P2P platform in Europe

TO THE PROVIDER*

Option 6: Bondora

On the Bondora platform, I no longer invest with the ‘Portfolio Pro’, where consumer loans often have a term of five years. That’s too long a period for me, even though there are often interest rates of up to 20% here.

‘Go & Grow’, on the other hand, offers its investors early exit opportunities, which is why I continue to invest in long-term loans through this service.

I am currently increasing my investments on these P2P lending platforms:

• Income Marketplace
• Estateguru
• Bondora

70/100

Punkte

Yield: 6.75 -11% interest

Investors: over 180,000

€5 bonus upon registration

TO THE 
PROVIDER*

Conclusion: I remain invested, but not across the board.

In general, investors should invest in tangible assets such as shares or ETFs and only consider P2P loans as a supplement to their portfolio. It is important, especially in the current market environment, to take a differentiated view of the various platforms. Because not every P2P lending platform is the same. In principle, loans with a long term should be avoided. Shorter terms have the advantage that they can be quickly adjusted for inflation. In the current interest rate environment, I therefore only consider loans with a term of up to two years. Anything longer is too risky for me at the moment. Despite everything, I remain invested in P2P loans, because it is precisely in such challenging times that great opportunities arise for investors.