Bondora- Estonian P2P loan portal

I start out by stating that I am exiting from the Bondora portal. I have several reasons for this and will talk about reasons and my history in this portal first. If you would just like to see my current stats on this portal - please scroll down a bit.

Also, thing stated here are my recollections about the portal, some facts might be a bit off, I have not made any notes along the way.

I started investing in Bondora in August 2016. Before depositing any money into the portal I had read about bet hedging and the fact that there is need to invest in about 200 loans in any given portal to give you better protection from bad loans. As I had savings to invest and at the time the minimum loan amount was 5€ - I deposited 1000€. This is no way a requirement to start with such a sum. You could always start with just a few loans to understand a portal and if you feel happy with the portal you could build up the portfolio over time. I was impatient and just put 1000€ in. And in the beginning, I was quite happy and added money over several months. 

Bondora gives out loans, evaluates the lender and gives the lender rating based on the risk seen. ratings go from AA (safest), through letters A, B, C, D, E, F and end with HR (standing for high risk). In all these categories there are different interest loans on the market for investors to invest in. The risk category is based on Bondora algorithms and is not true always of course. HR loan is more likely to not be paid back, but AA loan might stop paying as well... All the time I have been on the portal there has been option to also sell loans you have invested in, so portal allows quite a quick exit it needs might arise. But of course, selling loans which have problems means selling these with discount.

When I started in August 2016, there was an automatic investing option (can't remember what it was called), which allowed you to choose which loans to invest in. You could look at the country, loan purpose, interest amount etc and activate the program to invest in just such loans. There was always an option to manually select loans as well, but loans you would like might be willed by automated programs from other accounts so hand picking is time-consuming and was not the best solution. 

A bit later, I think in the autumn of 2016 they announced that this is too complicated for investors and decided to stop this option to auto-invest into loans you thought had potential to be paid back... I personally thought they were unhappy that some people were earning too much? Who knows. 

Instead, they had created some kind of portfolio manager where your only choice was to choose between 5(?) options: very conservative-conservative-balanced-progressive-very progressive. I am not sure about the names of these but this was the gist of the things. Each option showed the what kind of interest you might expect. The problem was that even the most conservative options invested in risky HR and F loans, which made many more conservative people (like me) unhappy. The official response to that was, that it might be sometimes needed to increase the interest yield of the portfolio to give you the promised interest of your chosen option. In reality, you might choose an option promising let's say 10% and Bondora showing that your current portfolio was already giving you 13%, so there was no need to take in more risky investments until more conservative AA and A loans bring your yield down, but it still happened. This was when I decided to stop the auto-investing on the portal. 

At the same time, there was talk that people were writing their own programs to still be able to choose which loans to invest in. Also, one was publicly offered- BeePlus. Beeplus allowed choosing from all the different characteristics Bandora was asking from the lenders. For example, you could just invest in loans given to Estonia, to people who had full employment, had income verified by the portal and who wanted to spend the money on health, or perhaps to all reasons besides traveling etc. You had huge options. I kept investing in Bondora as long as BeePlus was free to use. As I am investing as a private person and therefore all losses and any expenses can't be deducted from profits... when the BeePlus decided to make the use of the site paid I stopped using it. It was a bit more expensive in the beginning, now it is quite good: 1.9€ + 0.9% transaction* fee per month. But still, as I had realized that the Bondora changes its' policies when they want to, and their rating system is quite bad. I decided to end my relationship with Bondora by not investing anymore and any money that comes back to site as paid premium or interest has been withdrawn since January 2017. I could cut my losses and just sell all my loans- not sure if this would be better or not. We will see how this slow exit goes.

Of course as the new 5 option investing in the portal was unpopular it was changed several times and at the moment there is 9 option Portfolio Manager coming from ultra-conservative to opportunistic. It shows you the expected distribution of loans between ratings and countries. For example, the most conservative option would invest in AA, A and B loans (respectively 20%, 45% and 35%) and gives 55% of loans to Estonia and 45% to Finland. On the end of the scale is the most progressive option with AA 10%, A 2,5%, B 5%, C 17,5%, D 22,5%, E 12,5%, F 17,5% and HR 12,5% and loan origin countries would be divided as follows: Estonia 40%, Spain 30% and Finland 30%. And I guess there were still unhappy people - so the more detailed investing came back as Portfolio Pro. Portfolio Pro allows choosing Country, Rating (AA, A etc), loan duration and how much to invest in each borrower loans. So much fewer options compared to BeePlus. But still better (more nuanced) than the automated Portfolio Manager. I do feel these changes were too little too late. Bondora gives better investment interests than several other portals but I also have way more "red loans" - so loans which are not paying back as they should. And this happens in all categories which shows the automatic categorization is flawed and can not be trusted. But if you would like to invest in Bondora I would recommend at least checking out BeePlus. It is very helpful :)

Finally some statistics from my portfolio. I have deposited 1350 and as I am exiting I have withdrawn 520€ from the portal. So I need to get out 830 more to just get my money back (not taking into account inflation). They show my account value as 966,65€:

And profitability shown based on loan ratings is as follows:

Also as seen in the principal overdue column above, many of the loans are not paying back the loans. Based on my account - more than a third of the loans are overdue. In the graph gray shows repaid loans, green are current and reds and oranges are overdue. The large red 28,46%, for example, are loans overdue more than 180 days. Fun isn't it?

Well, they do try to get them to pay. If you look at the recovery process chart, they are doing something. Based on my loans some borrowers have made a new payment contract (the small blue sliver of about 2%). Others are in court 56%, or in the hands of bailiffs (30%) or in court with the civil claim (about 3%). So there is hope, but the process is so slow.

In the end some more just fun statistics about my portfolio:

• 69% of my loans are to Estonia, 15% to Spain and 16% to Finland
• Quater of my loans are from rating C. AA, A and B loans are also almost a quarter altogether.
• The biggest part of the loans based on my portfolio is for home redecorating 29,6%, second largest is other reason 22,5% and third is loan consolidation with 13,8%. Loan consolidation? Really. I mean Bondora does not offer low interests for people needing money. What did they pay off to be happy to replace their other loans with Bondora? The famous SMS loans? Sad to see this... Also why to borrow for home decoration? If your roof is leeking and you need to save your home from loss of value I do understand, but if you just want new wallpaper you really should save up :)

As I have not given out any new loans in Bondora for more than a year, my critique of the rating system might be out of date. Please take this into account. Maybe someone who starts today and has a similar rating balance would not have about a third of their loans late... But as this is my experience I just love another portal who offers a lot of loans with about 8-13% interest with buyback quarantee... Totally different feelings compared to Bondora where every time I log on I see that third of my loans are red...

More info on Bondora in easy to follow videos in English, Estonian and German from their YouTube channel.