Studies of Life

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Bondora Payment Reliability Update 2014: 71 to 96%

07 January 2015 by Jim

I wanted to post an update on how my Bondora portfolio is doing. There have recently been changes regarding the portfolio manager, which has been replaced by a new version, and the loan pricing system has changed as well. As a result, many of my previous A800-A1000 loans (presumably high quality) have become HR (High-Risk) loans with the new rating, so I’ve sold some of these HR loans at a discount, which lowers my return, in order to sanitise my portfolio a bit.

As you can see on the graph below, the principal payments are almost complete. The average principal amount paid is 96% of the planned principal. On the interest side, the average actual interest paid is 71% of the planned interest. That’s still not bad. My current return, according to the calculator, is 16.1% per year. The new loan pricing based on the new risk rating system will reduce returns compared to the 20%+ I initially saw.

Bondora Payment Reliability

The new portfolio manager suggest that with a “market portfolio”, i.e. a portfolio Bondora Market Mixholding the available loan risk grades in equal weights as the total Bondora market (minus HR loans, because those are excluded from this standard portfolio manager), will get a return of 16.1%. Since I currently have HR loans (even though I’d prefer not to), my return should be a bit higher than that, but also more risky.

Under it is my custom portfolio setup, with a few more D, E and F loans. In the future, I’ll stick to that (i.e. I don’t want any HR loans anymore, even if the return there is highest). Apparently the new risk rating system makes the HR loans much more expensive (40, 60, 70% interest) so there will be Custom Bondora portfolio with the new managerfewer borrowers who can afford them, and their relative share of the market will decrease, which means the average quality of loans will increase.

Current Bondora portfolio

As you can see quite a big chunk has been repaid already (more than 25%!, the green piece)

I’m very happy with my current portfolio, even if the overdue loans scare me a little, but their proportion being higher is normal in my case: I withdraw about 70-80% of my earned interest every month. If I reinvested it, the ‘current loans’ section would grow a lot faster than it does now, and the overdue loans would look smaller by comparison. I’ll reduce the weight of my Bondora portfolio in the future by withdrawing the same amount of interest every month. My portfolio still grows, but other parts of my investments grow faster so when I invest new money, it will be in my stock / bond portfolio first, before I add fresh funds to Bondora. At the beginning, Bondora represented more than 50% of my net worth, and that was quite risky I think. If I get it down to 35-40%, that will be more manageable for myself.

Many people are unhappy about the recent Bondora changes, but I think they will improve Bondora’s overall quality and sustainability. If the risk of every loan is evaluated more exactly than before, we should be seeing less overdue loans in the future. And the portfolio manager now is much simpler to use than before.

I am currently not getting the highest return, as I said I get 16.1% right now, and I’m apparently not in the top 50% of investors in my group. However, I have other investments, and a job to take care of, so I don’t want to spend my entire day managing Bondora. It would definitely be possible, with enough time, to more closely manage overdue loans and get rid of them and improve returns, but I currently prefer to set things up properly once and then just let it run its course. Earning 1000€ more in my normal job as a translator is less work than spending hours online to optimise my portfolio.

Bondora Return Comparison

What about your experience? Let me know in the comments!


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