Selecting Peer-to-Peer lending platforms on which to invest on is one of the most important parts of building a solid Peer-to-Peer lending portfolio. Indeed, having solid platforms in your portfolio means that you will have great returns, fewer risks on your invested money, and also less time spent on actually managing your portfolio in the future. In this article, I'll share with you all the criteria that I use to select the best Peer-to-Peer platforms for my own portfolio.

Making sure the platform is an actual business

The first thing you have to do is quite straightforward: making sure that the platform is an actual business. There are nearly no scams in the Peer-to-Peer lending space, but one can never be too precautious when it comes to investing your own money, so I recommend doing all those tests that I came up with before investing on any new platform, even if it has been recommended to you by someone you trust. 

First, create an account on the platform. It's free on all Peer-to-Peer lending platforms and is usually done in a matter of minutes. At this point, or at least before you can start investing, the platform should ask you to verify your ID by uploading some documentation. If they don't do that, it is already a very bad sign, as this is required by the European Union as part of an effort against money laundering. 

Then, get in touch with the platform via email, asking for a random question about your account. A good platform will answer in less than 24 hours, and a pure scam will probably never answer you. Also make sure to call with a similar question, and check how is their answer. Again, a platform that is just a scam will usually not have any phone number or won't answer the phone at all.

Still in the very basics, also check that the company is actually present in the company registry. This is done online easily in most European countries. If you can't find the company registration number on their site, ask them. Again, a company that has no legal existence or that refuses to give you their registration number is a very bad sign.

Finally, if they are available, check the company financials. Not all Peer-to-Peer lending companies are profitable, but sharing financials is already a big plus.

Check that the platform has the required features

Next, I have a look at all the features that a platform has. Indeed, there are a lot of platforms out there, so I recommend you should really choose the ones that have at least all the most important features that I will list here. 

The first one is the average return on investment on the platform. Peer-to-Peer lending, as for all investments, has a certain level of risk attached to it. The goal of the first rounds of criteria was to make sure to reduce this risk. Now, I also want a decent return on investment in exchange for the risk coming with all investments. For Peer-to-Peer lending platforms, I am looking for at least a 10% yield on the platform. The best way to check is that for now is to simply get the number given by the platform, we'll see in the last part of this article how to get a better estimate.

When I invest, I also always look to diversify, and that's definitely something you should be able to do on each platform you are investing on. For that, look at the loans/projects available on the platform, and make sure that you will be able to split your investment in as many loans or projects as possible. For example, a platform with just one project available might be a good one, but you might come in too early as you won't be able to diversify your investments on it. I usually look for platforms with at least 100 loans available, or with at least 10 projects in case of a platform specializing in real estate for example.

After that, I make sure that the platform offers at least a collateral on every loan or project it proposes. A collateral is an asset that is attached to the loan or project, for example, a car in case of a simple loan, or the property itself in case of a real estate development project. This will make sure that in case the borrower doesn't pay back, there is something to be taken by the platform to pay at least some of the money back to the investors. 

I also make sure that the platform comes with an auto-investing function, meaning you can pre-set some criteria and have the platform invest automatically for you. I want all my investments to be fully automated with just a little time every month to check on them, so this one is really important for platforms to have.

Now, here are two additional criteria that I really appreciate on platforms, but I would still invest on the platform if they are not present. The first one is the buyback guarantee. This means that on loans or projects covered by this guarantee the platform will give you your money back in case the borrower stops paying, usually after 30 or 60 days. This is really nice to have, however, I do still invest in platforms that don't have offer buyback guarantee, especially on platforms that offer collateral on every loan, for example, the ones that specialize in real estate development projects. Also, look for information about the size of the buyback guarantee fund: platforms that actually share that definitely get some points compared to the ones that don't. 

Finally, platforms that offer a secondary market also get my preference compared to the ones that don't, as it allows you as the investor to get out of some positions easily. For example, you could need to get some cash out of your investments, and that's only possible if there is a secondary market on the platform where you can sell loans to other investors.

Look for social proof from several independent sources

Finally, and this is maybe the most important set of criteria in this article, look for social proof about platforms you are considering investing in, and do it from as many different sources as possible.

The first type of social proof you can get is the good old word of mouth. This can be via some people you know personally, like other people that you know invest in Peer-to-Peer lending. If you don't have anyone that does that in your circle of friends, you can definitely look on forums or Facebook groups. I, for example, have a Facebook community of investors that invest in passive income generating assets like Peer-to-Peer lending, and where you can definitely ask other people their opinion about a given platform. To join, you can simply follow this link

However, don't only trust individual opinions on forums or groups. There can be some people on there as well who will just give your their 'good' opinion about a platform because they want some affiliate commission, or even because they work for this platform. That's why I really recommend checking other sources that basically aggregate reviews. The first one is TrustPilot, that aggregate reviews about various companies, including now some Peer-to-Peer lending platforms. Mintos for example, which is a platform I really recommend for anyone wanting to invest in Peer-to-Peer lending, has a trust score of more than 8 over 10, with now more than 700 reviews. 

Still, I also wanted to have a way to not just see people's reviews about platforms, but also see on average what actual results they get with a given platform. This is one of the reasons I created TrackInvest, a tool to manage Peer-to-Peer lending investments, but also to see anonymized statistics about platforms. For example, it allows you see the actual average return on investment of a given platform, which is good way to compare it to what is announced by the platform on their website. This is a completely free tool, and you can use it as well to see how other people are doing with platforms. 

That's already the end of this article about how to select Peer-to-Peer lending platforms, and I really hope it will help you make better choices about which Peer-to-Peer lending platforms to put in your portfolio!