A Very Bad Trend in Bondora’s Platform Statistics
What is it about?
Basically, the platform statistics show that the amount of money lost in defaulted (=more than 60 days overdue) loans is approaching the total amount of interest paid out, as can be seen here:
If this is true, and we assume that defaulted loans barely recover any money, then that means that on average, most investors on Bondora are not making a lot of money.
I personally treat my defaulted loans like write-offs that I will never recover. At most, I would expect 10-20% of the defaulted amount to be recovered sometime in the far future.
If more money is lost in defaulted loans than is earned in interest, which could soon be the case looking at these statistics, that would mean that on average people are losing money on Bondora. It might still be possible to earn money if you have a particular subset of well-performing loans, but the odds are stacked against you.
Even if I am wrong and interest will forever outstrip the defaulted loans, so that there is a net gain on the platform, the net difference is currently about 1 million out of 8, which means 7/8ths, or about 85% of the interest return on Bondora is lost due to defaulted loans. That can hardly be called efficient. As was pointed out on the forums, most investors in EU countries have to pay taxes on the interest they earn, but they cannot deduct the defaulted loans from their earnings, which reduces the return even further.
What is the conclusion?
Bondora’s borrower selection is not good enough to ensure good average returns. The defaults are piling up. That might explain why they are constantly changing the platform, because they know that it is unsustainable as it is now, so they try to improve it (hopefully) or cover it up (I hope not) by changing things so quickly that it is difficult to kee up.
I personally will continue withdrawing what I can from my Bondora account because it doesn’t seem to be a sustainable investing option. Other P2P lending sites like Twino or Prêt d’Union offer lower returns (5-10%) but they seem to be more sustainable for now.
Bondora’s initial 20% return claim was wonderful. But it might be good to remember that if something sounds like it is too good to be true, it probably is.
What is your opinion on Bondora’s evolution?
The statistics shown in the diagram are from this page.