The latest addition to the peer-to-peer market for loans in Sweden is Lendify. The company started in 2014 and wants to give the traditional banks a challenge.
Borrowing money from private individuals is not a new phenomenon. We humans have borrowed money from each other for a long time. What Lendify does is to offer a marketplace for this. They make a real effort for this type of loan to become a real challenger to loans from banks. With over 20 million in venture capital from, among others, Fredrik Wallenberg and Resurs Bank’s founders, Lendify is now investing heavily.
Their business model is to act as a loan intermediary between private individuals and make money from brokerage fees. Fredrik Wallenberg is a hidden object in the Wallenberg family but has, among other things, been involved in creating the popular museum Junibacken at Djurgården in Stockholm.
A private loan between individuals
Many of the early P2P loans were made with small amounts and fairly high effective interest rates. Much because there are significant risks of lending money. For those who want to borrow a little higher amounts and at reasonable market rates, P2P has not been an alternative until possibly now.
What Lendify does is that you raise the levels and can offer traditional private loans without collateral of between SEK 20,000 and SEK 500,000. The effective interest rate for the borrower varies between 3.95% – 17.66%. For anyone who wants to lend money, this is money to earn from net interest income, just as the banks do. The return rate is between 3.5 – 8.2% and varies with risk and repayment period.
How do lenders manage the risk of Lendify?
Of course, lending money to other people is associated with risk. There is a risk that the person does not repay the money.
What Lendify does is that you can control your risk yourself quite well. As an investor, you have many choices that all affect your overall risk.
Then you can manage risk through Lendify
- Choose how much money you want to invest . The main pillar is that you should not spend money here that you may need within 1-2 years, as it is not to equate to a savings account with free withdrawals.
- Distribute the loan amount on several loans . This is an important part of the risk diversification. Loan losses (unpaid loans) have been over 1% over the past seven years. This means that approximately 1% of all loans are never repaid. You must be prepared for it to happen for any of your loans via Lendify.
- Borrow to sensible borrowers / projects . You can’t see who the money goes to, but you can, for example. Choose to lend money to people who are going to study, renovate or go on vacation. Each type of loan is risk-rated and you see interest rate, repayment time and how much of the loan has already been financed. The average borrower at Lendify has an income of SEK 400,000 / year.