Investing in p2p loans
During Coronavirus emergency
Markets during epidemics
In economic history, epidemics are periods of very serious economic crisis which luckly has a solution in a relatively small time.
One question that many of you have been asking me lately is:
What kind of loans are likely gonna be safer during this pandemic?
During this period of crisis, some platforms may have liquidity problems and be forced to declare bankruptcy, especially if the lockdown period will be prolonged as seems likely, so the first advice I feel right to give you is to invest in solid platforms. Startups and new market players usually do not have big amounts of money as a reserve so would likely be among the firsts to go tits up.
Safer loan types
During times of crisis, among the loans that perform better, there are those that have something as pledge to the loan. Among the best there are loans for cars and house mortgages with a preference for the former because they are usually smaller and therefore more easily sustainable in times of crisis. For this reason I am increasing my presence on Lenndy which has one of the core businesses in car loans, and the Mogo loan originator on Mintos.
For the house mortgages part, on the other hand, I am slightly increasing my position on EstateGuru with a preference for renovation projects rather than new built because:
- With new built the mortgage is on the land and not on a building. The land, in times of crisis, devalues much more than buildings thus leading, in the event of loan default, to a much lower recovery than expected.
- The projects that still have to begin building, are far less likely to see an end in decent times than a restructuring.
It’s almost a month now thtat I have blocked all the automatic investment portfolios on all platforms and I invest only by hand and trying to be as careful as possbile, because during times of crisis like this there are also excellent opportunities. These days, many people are trying to get out of mintos by selling excellent quality loans in the secondary market. I therefore found myself reinvesting the amounts that returned from previous investments by manually purchasing many car loans issued by Mogo (very large loan originator listed on the Canadian stock exchange) on the secondary market with discounts of up to 12% and with a remaining duration of a few months . I also took some money away from Grupeer by reinvesting half of it on Lenndy and the other half on Bondora’s Go & Grow so I could eventually get out quickly.