A marketplace dedicated for consumer loans from Europe’s leading FinTech company Creditstar
|Total Investment Volume||€10m+|
|Average annual interest:||12-14%|
|Who’s eligible to invest||EEA and Switzerland|
|Investment Type||Short-term consumer loans|
|Auto Invest Function||Yes|
|Investor Protection||Two-level Buyback Guarantee|
|Website Languages||English, German, Spanish|
PROS & CONS
- Managed by a profitable financial group
- “Skin in the game”
- Enhanced buyback guarantee
- No early exit options
- Fixed interest rates
- Limited transparency
- The platform is a subsidiary of Creditstar Group – one of the leading digital consumer finance companies in Europe. Unlike Lendermarket itself, Creditstar has been around for years, always delivering good financial results. However, as you might know from our review of Robocash, this pro might as well turn into a con in terms of limited diversification, a.k.a. “all eggs in one basket”.
- “Skin in the game” means that the loan originator keeps a certain share of the loan (5% in the case of Lendermarket). This ensures the originator’s interests are aligned with your interests as both sides have a stake in the investment.
- Lendermarket offers a two-level buyback guarantee. First, the loan originator is obliged to repay the investment and accrued interest when the loan is overdue for 60 days. Second, in the case of insolvency of a loan originator, Creditstar Group vows to cover all the liabilities of this loan originator within so-called “group buyback guarantee”. Note though that, considering all loan originators are a part of the same group, this scheme does not bring so much more confidence as it might seem.
- There is no secondary market or any other early exit option. This was a lesser concern when the platform focused mostly on payday loans. With the proliferation of longer-term loans though, you can be stuck with some loans for a long time.
- Lendermarket offers the same interest rate for all loans. Although this offers certain simplicity and eliminates rate-based competition, it also distorts the risk-return ratios. To illustrate this, let’s look at Creditstar loans available on Mintos – the interest rates vary from 10.5% to 16.5% depending on the loan duration, country of origin, etc. Yet the same loans will all have a fixed 12% or 14% rate (more on this below) on Lendermarket. At the end of the day, it means that some loan will likely be over- and some under-priced.
- There is a lot of missing information about the platform, including the team composition, the exact nature of the relationship with the Group (ownership structure), or the reason for registering the platform in Ireland while the employees seem to be located in Creditstar’s office in Estonia.
Who is Lendermarket best for?
Lendermarket is a good choice for investors who are interested specifically in consumer loans from Creditstar. Credistar’s long-term strategy might be to withdraw from other platforms, which would make Lendermarket the only way to access its loans.
Right now though, it’s quite unclear what added value Lendermarket brings compared to investing in Creditstar loans through, for example, Mintos. Mintos offers variable, risk-adjusted interest and also, an early exit option and opportunities to diversify across a range of other loan originators, countries and loan types.
What does Lendermarket offer?
Creditstar loan originators offer mostly short-term consumer loans in two categories:
- Microloans between $50 and €1,000 with maturity from 5 days to 3 months; and
- Instalment loans of up to € 5,000, lasting up to 3 years.
Borrowers initially came from Poland and Spain, and these two remain most common, even though loans from other countries, including Czechia, Denmark, Estonia, Finland, and Sweden, were later introduced.
Who is behind Lendermarket?
Creditstar Group is a technology-based consumer finance company, established in 2006. It has 12 subsidiaries, which have served over 800,000 customers across eight countries in Europe.
It has a relatively good track record, with stable profits and significant cash reserves – good news if you were worried about the buyback guarantee safety. Nonetheless, transparency and reliability are an issue. For example, their financial reports might have been audited by a second-rate firm. The fact that I found the company presentation and financial statements via Mintos rather than Credistar’s own website doesn’t bring much confidence either.
How much can you earn?
Initially, the interest rate was fixed at 12% for all loans. In March 2020, it was increased to 14%, probably due to the pandemic-induced decreased demand and increased risk. As of December 2020, most loans seem to yield 14% annually, but loans with 12% interest rate are also available.
You might want to look for some bonus schemes – Lendermarket used to have a quite interesting cashback programme as well as, more recently, a rather peculiar “5 iPhones in 5 weeks” campaign, where users who had invested at least €100 could take part in a prize draw.
How to invest on Lendermarket
The process is pretty straightforward: you fill out the registration form, verify your identity, add funds, and you’re good to go. You can start picking the loans manually or set up auto-investment parameters.
Creditstar is more than a decent financial services provider, and their loans are certainly worth including in your P2P investment portfolio. Nonetheless, so far, they are accessible via other platforms, which provide you with additional perks Lendermarket lacks, especially the early exit and diversification options. There doesn’t seem to be any good reason to give up those perks and choose Lendermarket.
At P2PMarketData we are dedicated to providing unbiased reviews of peer-to-peer lending, real estate crowdfunding and crypto lending platforms. Among other, in our mission to bring more transparency to the market we closely monitor and track over 70 platforms funding volumes.
When reviewing an alternative investment platform, we consider a variety of factors such as:
- Number of investors
- Minimum investment requirement
- Historical annual returns
- Diversification opportunities
- Reinvestment opportunities
- Educational and informational offerings
- Platform fees
- Total capital invested
- Features (such as secondary market and automatic investing)
- General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
- Management team
We also look into the company’s online reputation (for example customer reviews, news, complaints, average monthly searches and social media).