Category: Tutorials

Investing in P2P Lending – Beginner`s Guide Vol. 2

Tutorials

In the previous article, you learned how to choose a P2P lending platform, how to create your account at iuvo, what we require from you to pass due diligence, and how to filter loans in the Primary market. It’s time to dig a little deeper and show you a trick on how to make smart investments, without missing out on excellent loan opportunities.

Auto-Invest feature in iuvo

The Auto-Invest feature is here to save you time and help you take advantage of all loans that match your investment criteria, even when you’re not logged into the platform. It allows you to build your investment portfolio, by enabling you to craft your loan preferences and save them. Once you set up this feature, the platform will browse for all published loans that match your filter and will invest in them on your behalf.

Auto-Invest doesn’t stop you from doing manual operations through iuvo. If anything, it enhances your investment opportunities.

How do I set it up?

The easiest way to set up the Auto-Invest feature is to replicate the work you’ve done when filtering loans on the Primary market. Since you’ve already browsed through different sizes and types of loans, you’ve probably decided which ones you’d rather invest in. You can set up filters like score class, expected returns, the number of outstanding payments, loan status, etc. – everything you consider important.

Be smart when choosing your preferences, because from now on the platform will only select loans that match them, and it will filter out all other loans.

How much should I invest?

To take full advantage of the platform’s benefits, we recommend that you enter a larger amount than the actual funds available in your account. When you do that, the platform will start automatically reinvesting all your returns, subsequently bringing you more earnings from the compound interest.

Can I stop the Auto-Invest feature? How?

There is nothing mandatory at iuvo, and Auto-Invest makes no difference to that rule. You can stop or resume using the feature at any moment. Once you have created a custom portfolio, you can simply hit the “Pause” button, and Iuvo will stop investing in that filter until you resume.

You can save multiple filters and experiment with investing in various types of loans. If you find that one of your portfolios isn’t bringing you good returns, you can press “Cancel” and delete it altogether.

Okay, I see my returns growing! What do I do now?

Undoubtedly, the best part about investing is getting to see your success, and having your Account Statement full of earnings! You have two possible choices about what to do with these funds. The first option is, of course, to reinvest them back into new loans. You can either do that manually or use Auto-Invest – you know the deal by now.

The second option is to withdraw some of your free funds and have them transferred to your bank account.

How do I withdraw?

When it comes to withdrawals, we have separate rules for individuals and companies.

If you’re an individual, you have to pass due diligence at this point, by sending us your ID and address details. You can verify your address by sending us a scan of a suitable document, such as your latest utility bill. Once complete this step, withdrawing is simple – just go to your Dashboard, and click on “Withdraw.”

If you’re a company, you’ve already passed the ID verification step when you registered your account. At this point, you will need to confirm your address.

There are no restrictions on how much you can withdraw at once – the only limit is the amount of available free funds. And by free, we mean funds that aren’t currently invested in loans.

How much does it cost to withdraw, and when will I see the money in my bank account?

Iuvo doesn’t charge you any withdrawal fees, but please note that the bank transfer might cost you a small fee, depending on whether your bank charges for incoming transfers.

Your withdraw request will be processed within two business days, however, with some banks, it might take a little longer than that.

Conclusion

We hope this article will make it easier for you to get around iuvo, and build your investment strategy. If you feel like you need to read more about specific topics, don’t forget to check out our previous blog posts! We’re sure they will set the right foundation for you!

Investing in P2P Lending – Beginner`s Guide Vol. 1

Tutorials

Nowadays more and more people are exploring investment opportunities for their free funds. There are so many options that it all gets too overwhelming and beginners don’t know how and where to start. If you’re considering investing in P2P lending and are wondering how to do it – here is a brief step-by-step guide for you!

Choose a P2P lending platform

Before choosing your P2P lending platform, there are some key factors you should consider. In short, you should look for high returns, liquidity, and a buy-back guarantee. Probably sounds easy but you might be wondering what those things actually mean.

If a platform has a high return rate, that means you can earn a substantial profit – provided you develop a good strategy and are consistent and smart with your moves. Liquidity means that you will be able to invest your funds straight away, without worrying about frequently changing asset prices and possible financial losses. And finally, the buy-back guarantee assures you that the loan originator will repay the invested principal, in the event of loan default.

Iuvo proudly covers all three of these essential factors. The most impressive part is undoubtedly our returns rate, which can get as high as 15,22%! Our loan portfolio is more than €30M up to date, with more than 16 000 loans available for investment.

Open an account and pass due diligence

Opening an account with Iuvo is easy as 1,2,3. Just register and verify your e-mail – your account is created!

If you are an individual, you can start investing straight away. You could pass due diligence at this point if you prefer to. However, it’s not mandatory until you decide to withdraw funds. We’ll address this in Vol. 2 of this guide, so stay tuned!

If you’re a legal entity, however, you’ll need to get verified before you can invest with Iuvo. The required documents are: scanned copy of your passport or both sides of your ID card; certificate of current legal status – translated in English; information for UBO / actual owners– translated in English; and company’s articles of association– translated in English.

You might be wondering – why do I need to pass this step? Since this is an investment platform and we operate with real loans and real money, we need to follow specific verification practices, called KYC and AML. KYC stands for “Know Your Customer,” and AML stands for “Anti-Money Laundering.” These practices help us prevent malicious actions from being done through our platform, such as: identity fraud, credit card details theft, and money laundering.

 

Deposit your funds

You can deposit in EUR, BGN, and RON. Make sure to do your research and make a final decision, because you can’t change your currency setting later on. Once you have chosen your preferred currency, go to your Dashboard, and click on “Add Funds.” You will see a detailed explanation of every step onward. Note that the general deposit method at Iuvo is via bank transfer – we have accounts in Allianz and Swedbank. Of course, there’s an option for intra-bank transfer, so you don’t need to have an account in either of those banks. For further information on deposits, check our article, called Depositing And Withdrawing Funds.

 

How do I start investing?

Iuvo has two main investment channels – the Primary market, and the Secondary market. The Primary market is a list of all loans coming from our originators. Before you invest, it’s a good idea to get acquainted with the Primary market specifics and browse through a couple of published loans. This will give you a good idea of what to take into consideration when investing.

First of all, loans have specific attributes that help you decide whether you want to invest in them. These attributes include loan class, borrower demographics, return rate, currency, and of course – repayment plan (how many installments have already been paid, and how many are due).

The loan class is marked with letters (A-E, HR) and shows the level of risk for each particular loan – how likely is the borrower to delay it, or not pay it all. The lowest risk rate is in A class loans. To further try and estimate the risk yourself, you can also check the demographics of each borrower such as age, education, income, etc.

If you want to see only certain kinds of loans, use the provided filters. You can filter by status, for example, and see only current or delayed loans. Another preferred filter is by expected return.

Now that you’re familiar with the Primary market, it’s time to create you auto-investment portfolio. To learn more about the auto-investment feature, how to set it up, get returns and withdraw your funds, stay tuned for the next article!

Loan Score Class and How to Use It

Tutorials

What is the Loan Score Class?

The loan score class is iuvo’s credit risk rating mark. It helps you determine the probability of a particular loan going default. Typically, each originator measures credit risk using its framework. However, for centralization, we had to develop a way to make credits from different originators comparable within iuvo. This is why we implemented the loan risk class – our own rating system.

The credit ratings at iuvo are:
Class A: 0 – 2% default probability
Class B: 2 – 10% default probability
Class C: 10 – 18% default probability
Class D: 18 – 25% default probability
Class E: 25 – 35% default probability
Class HR: above 35% default probability

How does the score class affect my profit?

People have a natural inclination to seek stability and avoid risk. With investments, however, the risk isn’t a bad thing, as long as you’re smart and strategic about it. When investing in a high-risk asset, you should be aware of the possible losses versus the amount of profit you can make.

Taking risks pays off in the long run, or in our language: investing in lower score class loans should ultimately bring you bigger returns. Here’s how it looks:

Class A: 5.03% – 6.31% return
Class B: 6.07% – 7.21% return
Class C: 6.96% – 8.13% return
Class D: 7.87% – 9.05% return
Class E: 10% – 12.34% return
Class HR: 11.87% – 15.22 return

This data is based on loans from December 2017. It can vary slightly between months and periods, however, what’s important is the trend: annual returns grow in reverse proportion to the loan score class. To maintain a healthy risk level in your investment portfolio, always keep in mind both the default probability and the expected return rate, and try to find your perfect balance between the two.

I’m trying to build my own investment strategy. Should I only look at the score class?

It’s never a good idea to follow only one attribute of the assets you’re investing in. When it comes to P2P lending, you can enhance your strategy by monitoring both the loan score class and the borrower`s details.

Once logged in, go to the Primary market, and click on any loan’s ID – this will reveal the loan’s attributes. Check the Borrower and Collateral section. There you can see insightful data about each borrower’s profile. All the information in this section is provided by the loan originator and isn’t edited or altered by iuvo.

The borrower profile includes: sex, age, education, occupation, salary level, and partner’s salary level (unless the borrower is single/unmarried). Based on these details, as well as other factors (such as personal credit history) originators evaluate a borrower’s solvency, and thus – the credit default probability.

Due to confidentiality restraints, iuvo doesn’t have access to borrowers’ personal information such as name, ID number, and credit history.

How is the borrower`s profile connected to the loan score class?
By going through borrower profiles and considering their loans’ score class, you can narrow down your own criteria and start targeting a certain type of “borrower persona” in the platform. E.g., you could decide that a reliable borrower for you means someone within a certain age group, whose earnings exceed a certain amount, and who has a certain education level.

Before you design your final strategy, make sure to experiment a bit with different borrower profiles and loan score classes – this will help you assess what risk level works best for you

What if I fail in my judgment?

Don’t forget about the Buy-back guarantee! In case a loan goes default, the Buy-back guarantee covers the full unpaid principal for the remainder of the loan. Read more about it here: What is Buy-back guarantee and how to control your investment risk.

Need more info? Check out the FAQ, as well other posts from the Tutorials section in our blog!

All the returns you can receive with iuvo

Tutorials

The most rewarding part about investing at iuvo is, of course, the moment you get to see your returns. As satisfying as it is to look at your account balance growing, you shouldn’t settle for just making sure that you’re earning something. It’s a good idea to regularly go through your Dashboard and your Account Statement for insight on how much you’re earning, and where it’s coming from. Keeping track of your returns’ size and origin can help you build your future investment strategies. Furthermore, collecting this information (and being precise about it) is especially important once you have to calculate and declare your income taxes.

What, where, how?

You can see an overview of your returns by going to your Dashboard. It represents a summary of all payments you receive, sorted by currency type. For a detailed breakdown of all incoming transactions, you can check your Account Statement. Payments you receive are calculated with an accuracy of 10 digits after the decimal point. However, for tidiness’ sake, we only display two digits after the decimal point.

We understand that the Account Statement might look a little confusing at first, but once you get the gist of it – it becomes effortless to analyze. To make it even simpler for you, we’ve prepared an overview of what kinds of payments you can expect to see.

Returns from loans you’ve invested in

When you invest in a loan from the primary market, your return flow depends on specific vital factors, such as:
– The agreed payment plan;
– What percentage of the loan you’ve invested in;
– Whether the borrower is keeping up with payments (or being late… or paying at all);
– Whether the borrower decides to make an early payment.

Regardless of the scenario, some rules always apply. For example, you get paid as soon as the originator receives a payment from the borrower, i.e., with each scheduled installment. Also, you will always get your returns from the interest and your returns from the principal, as two separate payments.

To illustrate your returns payments, let’s take an exemplary loan with duration of 12 months, and a 30-day installment plan. There are three possible scenarios:

A/ The borrower pays on time each month
In this case, you get paid once a month for twelve months. In your account statement, you will see two incoming transactions, as mentioned above.

B/ The borrower is late with their payment or doesn’t pay at all
Each originator charges borrowers a fee once their payment is overdue with more than 20 days. These fees vary in size and accrual period between originators. Your returns will directly depend on the percentage you hold from each loan.

If the borrower fails to make a payment, you are protected by the Buy-back guarantee. Once this guarantee is activated, you will be refunded with the remainder of the unpaid principal. These funds will go straight back to your account. The Buy-back guarantee does not cover the rest of the outstanding interest.

C/ The borrower decides to do an early repayment
Let’s say three months have passed, and the borrower chooses to pay the remaining nine installments all at once. In this scenario, you will receive the remainder of the unpaid principal, split into nine separate monthly payments per the pre-set installment schedule.

You will also receive a one-off payment for the current installment’s interest. Since we’re talking about an early repayment case, no interest will be accumulated anymore. That means you will stop getting interest rate for this loan – you will only get returns from the unpaid principal.

Returns from selling and buying loans on the secondary market

In the secondary market, you can get two types of returns:

A/ Selling loans for a higher value than what you invested
If you feel like a certain loan in your portfolio might be attractive for other investors, you can sell it at a higher price than your original investment. Having done that, you will receive two payments – one equal to the nominal value of the loan, and one equal to the premium/discount amount.

B/ Buying loans at a discounted price
In this case, you will start receiving payments according to the agreed installment plan for each loan. Again, you will see two payments in your account statement – one for the principal, and one for the interest.

Conclusion

This overview should help you better understand your returns size and origin. If you need further information, you can always check our FAQ section or contact our Customer Support associates at [email protected] Invest away!