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How To Avoid Investing in Problematic Lenders 

<article>
<section>
<h2>How You Can Avoid Investing in Problematic Lenders</h2>
<p>Do you want to avoid investing your hard-earned money into lending companies that might go bankrupt in the near future?</p>
<p>At P2P Empire, we are spending a lot of resources monitoring the P2P lending space and improving the return on our own investments on various P2P lending platforms.</p>
<p>In this article, we will give you some practical tips that will help you to lower your risk when investing in P2P loans.</p>
<div class="tips-box">
<h3>What You Should Consider</h3>
<br>In this article, we are giving you tips to reduce the risk of your investments if:
<ul>
<li>You invest in lending companies within the short-term or installment loan sector</li>
<li>You invest on a P2P marketplace that lists loans from various lenders</li>
<li>You invest in lenders from various countries</li>
</ul>
</div>
<p>If you are investing in P2P lending platforms like <a href="review/bondora">Bondora</a> or <a href="review/neo-finance">NEO Finance</a>, or crowdfunding platforms like <a href="review/estateguru">EstateGuru</a> or <a href="review/crowdestor">Crowdestor</a>, we recommend reading our dedicated reviews to learn more about the current amount of funds in recovery.</p>
<p><mark>The tips in this article are backed by our findings from the analysis of more than &euro;155M of &ldquo;funds in recovery&rdquo; from six P2P lending marketplaces. </mark></p>
<div class="alert-box">
<h3>Disclaimer</h3>
<p>Note that P2P lending is risky and you might lose some money by investing in P2P loans.</p>
<p>While our website will help you to reduce your risk when investing in loans, there&rsquo;s no way to limit all the risks.</p>
</div>
<center>
<p><mark>Check out the video below to get the main takeaways from this article.</mark></p>
<div class="video"><iframe src="https://www.youtube.com/embed/5LuZ1uDqFZ4" frameborder="0"></iframe></div>
</center>
<h2>7 Tips To Reduce Your Risk</h2>
<p>Here are 7 practical tips to reduce your risk of investing in potentially risky lending companies.</p>
<h3>1. Review Financial Data</h3>
<p>Reviewing up-to-date financial information of the lending companies should not be overlooked. Make sure to get your hands on an audited financial report for the last two years. The reports are typically in English and available on the marketplace on which you are investing.</p>
<p>Want to learn more about how to review financial reports? Check out this practical guide.</p>
<center>
<div class="video"><iframe src="https://www.youtube.com/embed/NaHkeBFGetc" frameborder="0"></iframe></div>
</center>
<p>Also, make sure to review the current market conditions of the lenders that you are investing in. Larger financial groups share a quarterly business overview with important information that will help you to evaluate the current trend in the business and how it impacts your portfolio.</p>
<h3>2. Research the Management</h3>
<p>All businesses are run by people. Make sure to get familiar with the management of the platforms and evaluate how they react to challenging market conditions or respond to our questions in one of our P2P talks.</p>
<h3>3. Learn about the Lending Practices</h3>
<p>Every market is different and investing in &ldquo;wild west&rdquo; territories can backfire in the future. Make sure to do some research about the country in which you are investing. Keep in mind that the lending practices vary depending on the level of regulation as well as various cultural aspects.</p>
<p>The most efficient way to gather information about specific markets is by listening to our <a href="podcast">podcast episodes</a> where we discuss this topic with the CEOs and founders of various lending companies.</p>
<h3>4. Avoid Marketplaces with a Bad Track Record</h3>
<p>A good marketplace is constantly monitoring the performance of the loan book of its lending partners and limits potentially risky investments. Unfortunately, there are also marketplaces that do not act in the best interest of investors. The risk of investing on those platforms is higher than the potential reward.</p>
<p><mark>An overlap of shareholders of the marketplace, as well as the lending companies, may have a negative impact on your portfolio. </mark></p>
<h3>5. Avoid Overleveraged Lenders</h3>
<p>Several lending companies that fund loans on various marketplaces have been suspended in the past. The risk of investing in lenders that fund the majority of their loan book on various marketplaces is higher.</p>
<div class="alert-box"><br>
<p>Here is a list of suspended lending companies that funded their loan book on multiple marketplaces:</p>
<ul>
<li>Dziesiatka Finanse</li>
<li>Presto</li>
<li>CBC</li>
<li>Monify</li>
<li>Lime</li>
<li>Mikrokasa</li>
<li>Net Got&oacute;wka</li>
<li>Aforti Finance</li>
</ul>
<p>Keep in mind that this is not the only variable that increases your investment risk. It is, however, something to consider when fine-tuning your investment strategy.</p>
</div>
<h3>6. Reduce Your Exposure in Unregulated Markets</h3>
<p>Investing in unregulated markets in South-East Asia or Africa should be approached with extreme caution. There are plenty of lending companies that apply aggressive lending practices and shift most of the risk towards P2P investors.</p>
<p>The political risk in those countries is often hard to evaluate which increases your risk of losing money. The offered interest in those countries is often not high enough to justify any exposure in lenders from those markets.</p>
<h3>7. Do Not Rely on Risk Ratings</h3>
<p>Risk ratings on various platforms may provide you with a false sense of security. In the past, well-rated companies have gone bust and investors' investments were locked or lost.</p>
<h2>&euro;155 M Funds in Recovery - Main Takeaways</h2>
<p>A great way to minimize the risk of P2P investments is to look at past data to see whether you can spot certain patterns.</p>
<div class="checklist-box">
<h3>Things to consider when interpreting our statics:</h3>
<ul>
<li>The data was retrieved in May 2021</li>
<li>We have used a variety of data sources (public and private sources)</li>
<li><a href="review/grupeer">Grupeer</a> does not provide data about the &ldquo;funds in recovery&rdquo; for individual lenders</li>
<li>doFinance and <a href="review/fast-invest">Fast Invest</a> are excluded from the charts as both companies don&rsquo;t provide data on this matter</li>
</ul>
</div>
<h3>Funds in Recovery by Marketplace</h3>
<img src="https://p2pgallery.s3.eu-central-1.amazonaws.com/funds-in-recovery-marketplace.webp" border="0" alt="funds in recovery marketplace" loading="lazy">
<p>When analyzing this data, you should consider the total loan book on the platform. While Mintos has the largest portion of the &ldquo;funds in recovery&rdquo;, <a href="review/viventor">Viventor</a>, Lenndy and Grupeer are in a much worse position than <a href="review/mintos">Mintos</a> as most of their loans have the status &ldquo;in recovery&rdquo;.</p>
<h3>Funds in Recovery by Country</h3>
<img src="https://p2pgallery.s3.eu-central-1.amazonaws.com/funds-in-recovery-country.webp" border="0" alt="funds in recovery country" loading="lazy">
<p><mark>*This chart does not include data from Grupeer as the platform does not provide it </mark></p>
<p>Poland, Ukraine, and Armenia seem to be the most problematic countries for lending companies followed by South-East-Asian and African countries.</p>
<p>Note that while many lending institutions have struggled in Poland or Ukraine, some lenders have still managed to generate solid profits while fulfilling all obligations towards investors. If you are looking for solid lenders from Ukraine and Poland, head over to our <a href="review/peerberry">PeerBerry review</a>.</p>
<h3>Funds in Recovery by Lenders</h3>
<img src="https://p2pgallery.s3.eu-central-1.amazonaws.com/funds-in-recovery-lender.webp" border="0" alt="funds in recovery lender" loading="lazy">
<p>In this chart, you can see the &euro;155 funds in recovery segmented according to the lending companies.</p>
<p><mark>As of June 2021, Mintos managed to recover 100% of the funds in recovery from Akulaku.</mark></p>
<h2>What&rsquo;s the Likelihood of Retrieving Your Money?</h2>
<p>The likelihood of recovering your funds highly depends on the ability of the marketplace and the legal contracts between the platform as well as the lending company.</p>
<p>Some marketplaces already have a solid track record when it comes to recovering investor&rsquo;s funds, while other marketplaces aren&rsquo;t as open about sharing the current status of the &ldquo;funds in recovery&rdquo;, which indicates that the chance to recover those funds is much lower.</p>
<div class="tips-box">
<h3>Practical Tips To Reduce Your Risk</h3>
<ol>
<li>Be an active investor</li>
<li>Be a responsible investor</li>
<li>Evaluate facts and read the latest news</li>
<li>Invest in established marketplaces</li>
<li>Diversify in high-quality loans</li>
<li>Decrease your investments in SME loans</li>
<li>Diversify across secured loans</li>
</ol>
</div>
</section>
</article>

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