Twino – P2P loans investing

Europe has seen a boom in microlending projects in the 2010s. Everyone wanted to ivnest in P2P loans. One of the better-known P2P institutions is Twino and Bondora. Twino was created in 2009 in Latvia by Armands Broks as a consumer loan company and added a P2P investment platform in 2015. Originally operating as a consumer lending company Finabay in Latvia, Russia, Georgia, Poland, and the Czech Republic, the Twino P2P platform now offers loans from Latvia, Poland, and Vietnam. They were the first to offer buyback guarantees and payment protection to investors, which in effect means, they are taking the risk, not you (your counterparty risk is with them, not the borrower).

Investments

Whenever there is a loan business, we should ask: Where are the loans coming from? Or flip that question; where is my money going? Sourcing P2P loans is probably the most important part of the job for any P2P lender, especially in a low-interest-rate environment, if the loans offer enticing rates.

The company sources its loans mostly through its sister companies in the SIA Twino group. That might mean higher quality of loan vetting, but on the other hand, less transparency in the process itself, as it is all kept in-house.

However, there are a few “perks” for investors to ease their worries. One of them is [buyback guarantee][https://www.crowdfundinsider.com/2015/08/73040-twino-guarantees-p2p-loans-with-buyback-promise/]. As the first P2P lending company in Europe, Twino started in 2015 guaranteeing to buy back loans that are 60 days behind schedule with their payments. This scheme only covers the principal and not missed interest, however, that only affects a small portion of the value of the loan.

Another guarantee, which covers both principal and interest payments, is the payback guarantee. This is an upgraded version, where Twino offers lower interest in return for guaranteeing paying for the loan in a similar manner as you would get paid if the loan wasn’t in default.

Risk profile

If you plan to invest with Twino, the best place to start is their statistics page. According to this, over 80 % of the whole loan portfolio is without any problems and delays, 10 % of loans are delayed and 1 % of loans are defaulted. Not bad, but not a safe investment.

Bear in mind these shares are calculated on a principal basis, which might paint a rosier picture than calculating just a number of loans. However, this measure is more accurate, as it shows how much of the loaned euros are in any kind of trouble.

And remember you can mitigate some of the risks with buyback and payback guarantees, which makes your portfolio even less risky.

Twino now

The company was started by Armand Broks in 2009. Originally offering loans with only the company capital, in 2015 they made a push to P2P with hires from Bondora. After that they expanded to even more products and countries, however current offering is limited to (again only) consumer loans – specifically from Poland, Latvia, and Vietnam. Poland is a large, growing European country where stability should be assumed therefore there is a low macroeconomic risk.

There are currently plans to allow investors to provide funds with credit/debit cards, however, for the time being, one has to be content with bank transfers (for example from Revolut).

After adding your funds to the profile, you can either set up auto-investments, where Twino buys securities(loans) for you or manually invest in selected securities. For manual investments should be noted that you can invest any amount from 1 EUR upwards.

If you want to withdraw the funds, bear in mind that it is only possible via bank transfer with amounts from 10 EUR upwards.

Six simple steps to investing:

1. Register
2. Decide how much to invest
3. Add money
4. Create an automatic portfolio
5. Enjoy the benefits
6. Beware of taxes

Registration is straightforward

You complete only a handful of short pages full of personal information and provide proof of identity. This is done (as usual) with a webcam and pictures of your ID.

Investment allocation

First of all, this is an alternative investment. There is no way around the fact that for most people the portfolio should consist mainly of high-quality publicly traded stocks and bonds or funds dealing with said securities. However, adding a little bit of alternative investment and exposure to the personal loan market is not a bad thing.

Unless you know exactly what you are doing to your portfolio of investments and savings, I would be very uncomfortable with alternative investments being in double digits in my portfolio and that does indeed include Twino (otherwise great service).

After that, you should also decide on how often if ever will you add to your investments and finally make a deposit.

Automatic portfolio

Even though there is an option to manually select securities either on the primary or on the secondary market, the less labor-intensive route would be creating an auto-invest portfolio. There you can limit investments to either Loan securities or real estate securities, limit investment amount in the portfolio, and also the required interest rate. Another option to further customize your investments is the term length and the country of origin.

Taxes

Word of caution: Twino does not usually handle taxes, that responsibility falls solely on the investor. Depending on your level of knowledge and comfortability with your local tax system, you should probably consult a professional tax preparer or tax advisor because profits derived from Twino investments are most likely taxable in your jurisdiction.

And that’s it. Twino is a wonderful alternative in the area of alternative fixed-income/debt investments however it still bears inherent risk that all investors should consider and never invest more than they can afford to lose.