P2P Glossary: 40 Terms in Plain Words

A

Accrued Interest

Interest earned but not yet paid to your account. Some platforms credit daily, others monthly; check withdrawal rules to avoid losing accrued days. On Maclear and Mintos, interest accrues daily and appears in your balance immediately; on some property platforms, you see nothing until the loan repays in full.

Auto-Invest

A feature that spreads your money across loans automatically according to filters you set (yield, term, country, loan type). It saves clicking but can over-concentrate if you set the net too wide. Robocash, PeerBerry and Mintos all offer mature auto-invest engines; the quality of execution varies. See our auto-invest setup guide for filter recommendations.

B

Buyback Guarantee / Buyback Obligation

A promise by the loan originator to repurchase the loan from you if the borrower is late by a certain number of days (often 60). It is not insurance; the originator's own solvency determines whether you get paid. Robocash has honoured buyback since 2017 across all subsidiaries; Lendermarket buyback is only as strong as Creditstar's balance sheet. If the originator collapses, the guarantee vanishes.

C

Cash Drag

Idle money sitting in your account earning nothing. A few days is normal; months of uninvested cash drags down your realised return. On Mintos, auto-invest should deploy cash within 24 hours if you have set broad filters; on property platforms with lumpy deal flow, cash drag can run weeks. Track it monthly.

Collateral

An asset (property, invoice, equipment) pledged by the borrower. If the borrower defaults, the platform can seize and sell it to recover your principal. Quality and valuation matter more than the existence of collateral. A second-lien mortgage on a distressed commercial property is collateral on paper, not in practice. InRento holds first-lien residential mortgages with LTV below 70 percent; Indemo buys discounted Spanish foreclosure notes with built-in equity cushions. Both are secured, but the risk profiles differ.

Compounding

Reinvesting interest payments to earn interest on interest. The difference between a 12 percent simple return and a 12 percent compounded return is material over five years. Platforms with auto-invest (Mintos, Robocash, Nectaro) compound automatically; on manual platforms, you must reinvest each repayment yourself or accept simple interest.

Concentration Risk

Too much of your portfolio tied to one platform, one originator, one geography or one borrower. A single failure wipes out disproportionate capital; diversification is the only defence. Lendermarket routes near-100 percent of loans through Creditstar; Nectaro funds only Dyninno-group loans. Both carry concentration risk that no licence can erase. See our first EUR 1,000 portfolio guide for allocation rules.

Crowdlending

Lending money to businesses or property developers through a platform, often in return for fixed interest. Crowdlending is one form of P2P; the term sometimes excludes consumer loans. Crowdpear and Profitus are pure crowdlending platforms; Mintos mixes consumer, SME and property in one marketplace.

D

Default

The borrower stops paying. On platforms with buyback, the originator steps in; on direct-lending platforms, you enter recovery. Default rate tells you how often it happens, not how much you lose. A 10 percent default rate with 100 percent buyback coverage costs you zero; a 1 percent default rate with no coverage can cost you 1 percent of capital.

Default Rate

The percentage of loans that go into default. A 5 percent default rate with full buyback coverage costs you nothing; a 5 percent default rate with no coverage can cost you 5 percent of capital. Platforms report default rates differently - some count only loans past 90 days, others past 60. Ask how it is measured before comparing platforms.

Diversification

Spreading your money across many loans, platforms, originators and geographies to limit the damage from any single failure. The only free lunch in finance. A portfolio split across Maclear (Swiss SME), InRento (Baltic buy-to-let) and Mintos (pan-European consumer) carries less systemic risk than EUR 10,000 in a single Latvian originator. See our allocation guide for tier rules.

Due Diligence

Checking the platform's licence, the originator's accounts, the collateral's valuation, the stated default rate and the reviews. What you do before you click invest. Our grading methodology performs institutional-grade due diligence on every European platform monthly; if you pick from the Green list, the heavy lifting is done.

E

ECSP

European Crowdfunding Service Provider, a licence under the EU Crowdfunding Regulation that enforces conduct rules, disclosure and complaints handling. It does not provide a compensation scheme and does not cover borrower defaults. InRento, Capitalia and Profitus hold ECSP licences from the Bank of Lithuania; Mintos holds a higher MiFID II licence. See our licence explainer for what each regime protects.

F

First-Loss

A tranche of capital (often from the platform or developer) that absorbs the first losses before your money is touched. It aligns incentives; the size of the tranche matters. A 5 percent first-loss on a EUR 1 million property loan means the sponsor eats the first EUR 50,000 of losses; a 1 percent tranche is window-dressing. Ask how much, who provides it, and whether it sits in a separate account.

G

Grace Period

The number of days a borrower can be late before the loan is declared in default and buyback (if any) is triggered. Typical grace periods run 30 to 60 days. Robocash and Nectaro trigger buyback at 30 days; Lendermarket at 60. A longer grace period delays your recovery but does not change the underlying credit risk.

I

Idle Cash

Money in your account not yet invested. A sign of poor auto-invest settings, low loan supply or an exit in progress. Idle cash earns zero. Track it weekly; if it climbs above 5 percent of your portfolio for more than a month, either tighten your filters or move the money elsewhere.

Investor Compensation Scheme

A fund that reimburses investors if a licensed firm fails and client money goes missing. MiFID II platforms in some countries offer up to EUR 20,000 coverage; the scheme never covers borrower defaults or poor investment decisions. Mintos provides EUR 20,000 coverage via the Latvian scheme; Maclear holds a Swiss SRO licence with no compensation. The scheme protects you from platform insolvency, not from loans going bad.

L

LTV (Loan-to-Value)

The loan amount divided by the collateral's appraised value, expressed as a percentage. A 70 percent LTV property loan means the loan is 70 percent of the property's value; lower LTV offers more recovery cushion. InRento caps buy-to-let LTV at 70 percent; Crowdpear development loans can run 80 percent. LTV only protects you if the valuation is honest and the legal claim is enforceable.

M

MiFID II

Markets in Financial Instruments Directive, an EU licence that allows platforms to operate as investment firms. It brings conduct rules, segregated client money and, in some countries, access to a compensation scheme up to EUR 20,000. Mintos, Nectaro, Indemo and Twino hold MiFID II licences; the compensation scheme applies only in certain jurisdictions. See our licence guide for regime differences.

N

Net Return

What you actually keep after defaults, fees, taxes and cash drag. A 12 percent advertised yield minus 2 percent defaults, 1 percent fees and 1 percent cash drag leaves 8 percent net. Our returns guide walks through the calculation for every yield band; the gap between gross and net is where most disappointment lives.

Notes

Certificates representing a claim against a pool of loans rather than a direct loan to a borrower. Notes add a layer between you and the underlying asset; the issuer's solvency becomes your risk. Nectaro and some Mintos originators issue notes; if the originator defaults, the note can become worthless even if the underlying loans perform.

O

Originator

The company that issues the loan to the borrower and then sells it (or a participation in it) to investors via the platform. If the originator fails, buyback promises vanish. Lendermarket routes loans through Creditstar; Robocash uses six in-group originators across Europe and Asia. Originator concentration is platform risk by another name.

P

P2P Lending

Peer-to-peer lending; individuals lend money to borrowers (consumers, businesses, property developers) via an online platform, bypassing traditional banks. Returns come from interest; risk comes from borrower defaults and platform failure. See our explainer for how the model works and our risk guide for what can go wrong.

Platform Risk

The chance that the platform itself fails, freezes withdrawals, loses your data or goes into administration. Separate from credit risk; licence type and ownership structure determine platform risk. Reinvest24 froze withdrawals in February 2024 without warning; Mintos has operated continuously since 2015. Our grades weight platform risk at 30 percent of the total score.

Principal

The amount of money you lent, excluding interest. Recovering principal in a default scenario is harder than recovering interest. A platform that advertises "zero principal losses" is worth watching; a platform that loses principal regularly is worth avoiding.

Prospectus

A legal document describing the investment, its risks, the borrower's finances and the platform's role. ECSP platforms must publish a Key Investment Information Sheet (KIIS) for offers above EUR 1 million. Read it; the risk section often tells you more than the platform's marketing page.

R

Realised Return

The actual percentage you earned after all loans have been repaid, defaults deducted, fees subtracted and cash drag accounted for. The only number that matters. Indemo reports 23 percent realised on 13 completed deals; Maclear reports 14.9 percent for 2024. Compare realised to advertised to gauge honesty.

Recovery

The process of claiming money from a defaulted borrower, selling collateral or pursuing guarantors. Recovery rates vary wildly; a 50 percent recovery on a defaulted loan means you lost 50 percent of that principal. EstateGuru has ~60 percent of its portfolio in recovery as of 2026; outcomes remain uncertain.

Recovery Rate

The percentage of principal recovered after a loan defaults. A platform with a 10 percent default rate and 50 percent recovery loses 5 percent of capital; a platform with 10 percent defaults and zero recovery loses 10 percent. Recovery rates rarely appear in marketing materials; ask for them before you invest.

S

Secondary Market

A marketplace where you can sell your loans to other investors before maturity. It offers liquidity if you need to exit early, but trades often happen at a discount during stress. Mintos operates the largest P2P secondary market in Europe; PeerBerry launched one in 2026. Liquidity evaporates when everyone wants out at once. See our exit guide for timing tactics.

Secured Loan

A loan backed by collateral. If the borrower defaults, the lender can seize the asset. Secured does not mean safe; valuation, legal enforceability and recovery timelines all matter. A first-lien residential mortgage in Vilnius is secured and relatively safe; a third-lien claim on Ukrainian farmland is secured on paper only.

Skin in the Game

When the platform, originator or developer co-invests their own money alongside yours. It aligns incentives but only if the amount is material and verifiable. A EUR 10,000 co-investment on a EUR 1 million property deal is window-dressing; a 20 percent co-investment is real skin. Ask how much and whether it sits in a separate account.

SME Lending

Lending to small and medium-sized enterprises. SME loans often carry higher yields than consumer loans but require deeper due diligence on the borrower's business model, cash flow and sector risk. Maclear and Capitalia specialise in Baltic SME lending; both offer investment-grade underwriting and real collateral.

SPV (Special Purpose Vehicle)

A legal entity created to hold a single asset or loan. Investors buy shares in the SPV rather than lending directly; the structure isolates the asset but adds opacity and often dilutes your claim. Reinvest24 used SPVs for every property; when withdrawals froze, unravelling the structures became legally complex. SPVs are not inherently bad, but they require extra scrutiny.

SRO (Self-Regulatory Organisation)

A membership body that enforces anti-money-laundering rules and conduct standards but offers no compensation scheme and no prudential supervision. Maclear holds an SRO licence in Switzerland; it is not equivalent to ECSP or MiFID II. The licence confirms AML compliance and operational standards but does not protect your capital if the platform fails.

W

Wind-Down

The orderly closure of a platform, repaying investors as loans mature. A managed wind-down is better than insolvency, but you may wait months or years to recover all capital. Twino unwound its Russia exposure in 2022-2023 by letting loans mature; investors received principal but no new opportunities.

X

XIRR

Extended Internal Rate of Return; a calculation that accounts for irregular cash flows (deposits, withdrawals, reinvestments) to show your true annualised return. XIRR is the most accurate performance measure for a P2P portfolio. Excel and Google Sheets both offer XIRR functions; feed in your transaction history to see what you truly earned.

Y

Yield

The annual interest rate advertised by the platform or loan. Yield is gross; your net return will be lower after defaults, fees and cash drag. A 15 percent yield sounds attractive; a 15 percent yield minus 3 percent defaults, 1 percent fees and 2 percent cash drag leaves 9 percent net. Always ask for realised return data. See our returns guide for the full breakdown.

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