Borrowing money and lending money is an ancient phenomenon. However, something that has usually been associated with the lender being the one who made money financially on the loan. In modern times, it has almost always been the case that only the banks were the ones who had the loan yield available. Today, it looks different with peer to peer loans.
Benefits for both parties
With today’s technology, investors of all levels can choose to invest in loans. This is simplified through so-called peer to peer loans. In short, this means removing the intermediary that usually existed earlier, ie the bank, by managing the loan process via a digital platform. You as an investor can turn to one of the Swedish players for peer to peer loans and thereby invest in loans that give a better return on your investment. As a borrower, you usually receive lower interest rates than if you turned to a bank. In other words, a loan variant that both lenders and borrowers earn.
Largest in Sweden
If you want to invest in loans, there are several players in Sweden who provide this service. However, the largest player in the industry is Borrowfy, which is the market leader when it comes to peer to peer loans. Borrowfy is owned by well-known names that are part of the Lundin and Wallenberg families and founders of Avito.
Borrowfy was founded in 2014 in Stockholm. The business plan behind Borrowfy is to provide a service where investors and borrowers meet via a digital platform. Through this digital platform, the entire loan process is handled by Borrowfy, ie review of loan applications, drawing up agreements, the payment of loans and the entire administrative process involved in this. This is of course done with permission from Gold Save Finance.
Also worth noting is that you as an investor carry the credit risk as Borrowfy is not covered by the state deposit guarantee. However, the risk is very low and if you look at it from a historical point of view, the average of credit losses on loans to creditworthy persons on average is only about 1 percent.
How does it work?
As an investor you can choose to start an auto investment account with Borrowfy. This means that you invest in a number of different loans, and the risk spread is entirely managed by Borrowfy. Of course, you can also invest in a completely manual account and manage everything from risk diversification to choosing loans yourself, based on maturity and risk class. Borrowfy caters to both large and small investors and what sets these two apart at Borrowfy is the risk spread that depends on how much you choose to invest in loans.
When you then include expected credit losses and fees in the calculations, the annual return is between 2.5 percent and 8 percent. In other words, a very good investment if you have the opportunity to do this, as well as the opportunity to help other people who are in need of loans.