Bondora Update and Go & Grow as call money? 5 Euro start bonus

Frequent readers of this blog might know that Bondora and I not were friends, we still aren’t but the relationship got better. One year ago I advised newcomers not to join Bondora, but started my second try back then.

In September I launched a portfolio manager (autoinvest) with a balanced approach. Sporadically I checked out what was going on, but never intervened (no deposits or withdrawals as well). After one year (blue bar) my yield is above the expected yield still, but decreased over time drastically. This was and still is one main critisism from my side.

Bondora yield
My Bondora yield after one year, balanced profile
At the beginning everything looked fantastic with the high yields, which relatived over time. Still, I am positively surprised by them (although my calculated xirr is lower). I hope that my actual yield will stay in the expected bandwith for the coming years. Bondora is no marketplace for short term investments, until now. With the recent Go & Grow addition they filled this gap. More about that at a later stage in this post.

Short overview of Bondora’s multiple services

Before I get into details about Go & Grow, I’d like to give an overview of all available services:

Portfolio Manager
The portfolio manager is just a simple autoinvest feature with very limited input factors. Nice for investors who do not wish to deal too much with the marketplace, and think the expected returns are reliable.

Portfolio Manager pro…
… is actually an enhanced version of the portfolio manager with some more features to control. You can exclude specific countries and ratings and set the investment duration and the size invested in each loan.

API
API is the programmable interface with which you can set your individual settings for loans. You need some coding experience for that or for example use a firefox plugin. You need to deal with the loanbook first and identify your settings from there.

And now the famous Go and Grow (replacement for call money?) with 6.75 yield p.a

By introducing Go & Grow Bondora now offers a short term lending service which resembles a call money account.Go and Grow pays 6.75% annual interest on a daily basis. You can withdraw the money when you need it, but keep in mind the withdrawal is charged with 1 Euro. If you invest 1k for example, after 6 days you already earned the fee plus some cents more. I park some of my liquidity with Go and Grow. I see this service not as alternative to an overnight account, but as a supplement.

Bondora pushes Go and Grow at the moment (by using this linke for registration you get 5 Euro free as a bonus on your account), as this is a cheap and easy funding source for them. On the left side of your dashboard you ses Go & Grow and this is where you can create the Go and Grow account. You can use more then one service simoultanously. In my case the portfolio manager is running, which I have to pause if I want to add funds from my account to go and grow. Or you can directly deposit into your go and grow account, by referincing your wire transfer correctly. This looks like this: first name last name 123456 (like your normal deposit) & add your GG reference for example GG12345. But this is shown in the go and grow section. There is the possiblility to set that all your future cash flows move directly in to go and grow, plus Bondora buys your entire portfolio, if you already have one. If you chose to do this, please be reminded that this is irreverible.

daily bondora interest, call money account
My Go and Grow after one day

Final remarks

I am still of the opinion that Bondora with all their possibilities and data, needs serious time to get handled. Go and Grow is an exception to that of course. My experience from the past year eased my anger about Bondora, but I still suggest for new investors to start elsewhere. Of course Go and Grow is an exception to that, if you only use that. In my opinion it is not a good idea if you decide now to put all your liquidity on that account. For diversification and risk management purposes it is better to spread the funds on different accounts, even if they yield lower or 0 in extreme cases. As previously stated, new inverstors get 5 Euro by registering through this link.

Envestio – my so far review (interest up to 22%)

First of all I want to offer my appologies to my english reading visitors. Normally I try to translate my posts from German into English within two days after the German post has been released. Lately, I really had a lot of things to attend, so my time was very limited. I hope the situation will get better in the next weeks and you get my posts translated shortly after the German ones are published. Here we go:

At the beginning of this year Envestio got my attention when a Latvian digital marketing agency introduced it to me. Their goal was for me to publish a post about the marketplace. I highlighted my concerns over the platform as I found the loan supply confusing (Real Estate in Spain, Cryptomining etc). Further I could not imagine that there really were projects paying 18% of interest to investors (including buyback). The cryptoloan paid far more then 20% if I remember correctly. In the end I had not enough trust to try the platform and review it at that time, even though all my questions were answered and they tried to be as transparent as possible. So I declined, but still watched Envestio, until in July I was confident enough to give it a try with some pocket money. Now I am able to give you an overview of my so far experiences.

Registration/Deposit/Withdrawal – Cashback included

If you are registering thorugh this link, you’ll get 0.5 percentcashback on your investments  (plus one time 5 Euro Bonus) during the first 9 months. Cashback will be credited around the fifth every month, directly on your investment account.

Sign up is straight forward, confirm your email and you are in. Copy of your ID plus utility bill (or bank statement) is needed only before withdrawing. I suggest you do the verification in advance, so a withdrawal can be made any time. Somewhat special to me is that if you request a withdrawal you can fill out a blank form with your bank data, the data can be overwritten and is saved after each request. The first thing that came to mind was: What happens if I get hacked and all my money will be sent to another person. Envestio implemented a security mechanism for that, they double check withdrawals before processing. Only withdrawals will be processed if the beneficiare is the same person as the registered investor.

Minimal deposit amount is set to EUR 100, but you can invest from 1 Euro into each project. A little strange handling, huh? 😉 But that did not stop me 😉

Buyback guarantee/secondary market

Envestio does not (yet) provide a secondary market in the traditional sense, but they will rebuy your loan parts at a 5 percent discount rate. This means you’ll get EUR 9.50 back immediately for a EUR 10 loan part. This option is available until the maturity date is reached. If you do not sell your tranche and the loan defaults, you will get automatically 80 percent of your capital back. For the remaining 20% your got two options: 1) immediately take 10% and get 90 percent total. Or 2) you wait for the recovery process to happen and could get in the best case the rest back. I think this is just hypothetical, but it is your decision. Worst case you do not get anything out of recovery and have got back 80 percent. I asked if a loan can be prolonged if the maturity is reached and interest is paid monthly. Envestio would ask the investors if they would like that to happen, but generally they would like to send the loan into default and begin recovery proceedings. My impression is that the marketplace would not wait very long to get active with the recovery. They wrote that on their blog. But this is only my gut feeling. If this happens like that in reality is another, not yet tested, case.
So far, no loan was in default according to Envestio.

Envestio offers a 100 percent buyback guarantee on certain projects, if you invest a defined amount, like 10k for example. In such a case, please keep in mind that this guarantee comes from Envestio, so if Envestio defaults, to guarantee is not worth that much.

Securities

Each loan is secured as laid out in the project description. There are commercial pledges and owner personal guarantees. An owner guarantee is not much worth to me as mostly the owners money is already inside the company. Furthermore as the loans are mostly to small enterprises with low capitalization.

One can ask if these companies are really that desperate as they pay 20 percent (I just take this number for the ease of the example, although the loan would cost more like 25 percent when platform fees are included) interest. I think we have to differentiate here a bit, as most loans are maturing within 3 to 9 months. If a company pays 20 percent annual for 6 months, this makes 10 percent effectively. If a company needs that liquidity to purchase material or for working capital purposes, I guess 10 percent are feasible. If they can operate with a good margin, my guess is this is an alright situation. To be clear: I still think the loans are high risk, but I can understand the need for bridge finance in a business.

Envestio is online since 2017…

… as marketplace, but already operation since 2014 as a private fund, according to their website. I asked the management why they came public and deal with retail investors, and why did they not stick to sophisticated/whealthy people. Background of my question: to get 100k in funding, one sophisticated investor is sufficent, but to get the same amount from retail investors, you would need like several hundreds. What is the easier path? I guessed the first one, but Envestio thinks otherwise. They see a huge potential in crowdlending, plus it is scalable. Furthermore crowdlending is only one part of their services the will offer. Last but not least, the Envestio people think that offering nice interest rates to the crowd for bridge financing business is a win win situation for everyone and it supports the economy. I agree on that one. Oh, if a big hitter is reading this: The platform has always some special projects available for people wanting to invest 100k plus. Just register and get in contact with them.

My closing thoughts

To date all my interest payments came punctual, no delays (which makes me sceptical). As no loan has reached maturity yet, I cannot talk about defaults or recovery proceedings.

You may have read between the lines, I am torn between that this is a great investment but very very risky. On one hand I like the idea to provide liquidity to companies for growing their business, on the other hand I think this is as risky as it gets. Such high interest rates do not come without high risks. One should remind himself of that before investing. I often consult the magical investment triangle (liquidity, return, risk) to assess investments. We here have good liquidity (monthly interest plus partial buybackback option), stellar returns so this means risks must be high (appologies if I repeat myself, but my mind is swirling around the risk part). What can I say more, just remind yourself of the risks involved and do not invest more then you are able to lose.

Ok, this is it from for now, if you are interested in Envestio, use this link to register and get your cashback and 5 Euro starting Bonus. Maybe read this article before you invest, to make sure you got the risks in check.

Do we have the (p2p) risks under control?

Do we have the p2p or crowdlending risks under control? This question keeps me busy from time to time. These high yields, buyback guarantees, the super easy autoinvests and all the fintech blah blah get me into maybe false security. Because of that I have compiled some problematic cases from the past months. I do not want to take the fun out of p2p, but we should consider not only the return part but the risk part as well. I just want to see this post as a reminder, that there is no free lunch, and double digit yields do not come without risks. The next default of a loan originator or a market place will happen. Maybe not tomorrow, but in the future.

Collateral – an ugly case

Let’s begin where p2p in Europe started, the United Kingdom. Zopa as the first platform in Europe has been operational since 2005, so for more then 13 years now. I figure that after all these years the p2p market has already matured a bit, furthermore as the FCA seemed be willing to help with regulation, rather then ban the whole thing. And exactly there it happens, Collateral defaults and the FCA does not look that good in handling this case. Here you can find a lot of discussions about this case.

More cases…

Comunitae, a spanish market place stops its operation due to insider fraud . Swiss p2p/Fintech has to deal with a massive fraud (sorry, only available in German) . And China with its shadow financial system hashas to deal with a gigantic fraud scheme. Let us add the default of Eurocent with Mintos, and it becomes clear, that high risks are involved within p2p and crowdfunding.

It comes a litte surprisingly that until now no Baltic market place has defaulted. Firstly, this because there are lots of young platforms and secondly, they operate in a not quite regulated environment. I can envision that the money laundering scandal of Danske Bank in Estonia could lead to a crack down of p2p lending, or at least will be observed. I am sure that the Baltics will be closely monitored by the EU now. Although this Dankse case is not related to p2p, it will have an impact on regulation.

Closing remarks

As I said earlier, it is not my intention to present p2p in a bad light, but for me these cases clearly show that there are not to underestimating risks. I have no problem, ok I can deal better with, when a loan originator defaults because they were bad in business. This happens, it sucks, but it is something we have to deal with while investing. So the golden rule for investing is: never invest anything, which you cannot afford to lose. With fraud cases I have my problems, there was a crime commited and in most cases there where too few controls, if any. I am still a believer in the p2p story, but we have to be cautious as lenders.