P2P Lending Glossary: Every Term That Actually Matters

Jargon is where the risk hides. Every term below exists because someone needed a precise word, and half of them get waved around in marketing to make ye feel safer than ye are. Here’s what they actually mean.

Loan originator

The lending company that actually issues the loan: it finds the borrower, runs the credit check, hands over the money, and chases repayment. On marketplace platforms like Mintos or PeerBerry, you don’t lend to borrowers directly. You buy pieces of loans the originator already made, which creates a two-tier structure: platform on top, originators underneath. That makes originator solvency the real risk in consumer-loan P2P. The buyback guarantee, the loan servicing, the collections: all of it depends on this one company staying alive. When investors lost money on Mintos in 2020, it wasn’t because borrowers defaulted. It was because originators did. Before depositing, ask whether the originator publishes audited financials and whether it’s profitable. If you can’t answer that, you’re not investing, you’re guessing. Start with how P2P lending works if this structure is new to ye.

Buyback guarantee

A promise from the loan originator to repurchase a loan, usually with accrued interest, once it goes 60+ days overdue. It smooths your returns and makes defaults invisible on your dashboard. It does not remove risk: it converts thousands of small borrower risks into one big counterparty risk, the originator itself. If the originator fails, the guarantee fails with it, exactly when you need it most. Full breakdown in is P2P lending safe.

Auto-invest

A tool that automatically buys loans matching your criteria (interest rate, term, originator, country) the moment cash lands in your account. Genuinely useful for fighting cash drag and enforcing diversification. The catch: a sloppy auto-invest setup will happily concentrate your portfolio into one shaky originator paying the highest rate. Set the filters yourself and review them quarterly.

Assignment agreement

The legal contract that transfers a claim on a loan from the originator to you. On unregulated platforms, this piece of paper is what you actually own: a claim, not a security. Its enforceability depends on the originator’s home jurisdiction, and pursuing a defaulted claim in another country yourself is theoretical at best. In practice, you’re relying on the platform and originator to do it for you.

Cash drag

Money sitting idle in your platform account earning 0% while waiting to be invested. If 10% of your portfolio sits uninvested all year, your real return drops by roughly a tenth before anything even defaults. Common on platforms with thin loan supply. It’s the quietest way advertised returns and actual returns drift apart.

Default rate

The share of loans that stop being repaid. Platforms define it differently (60, 90, or 180 days overdue), which makes cross-platform comparisons mostly useless. A platform advertising a low default rate behind a buyback guarantee isn’t showing you borrower quality. It’s showing you how often the originator had to make good on its promise.

Diversification

Spreading money across loans, originators, platforms, and asset classes so one failure doesn’t sink ye. In P2P, the layer that matters most is the one people skip: owning 500 loans from one originator is one bet, not 500. Diversify across originators and platforms first, individual loans second.

ECSP license

The EU crowdfunding license (European Crowdfunding Service Provider) introduced by regulation in 2021. Licensed platforms face investor disclosure rules, capital requirements, and actual supervision. It covers business and real-estate crowdfunding, not consumer-loan marketplaces, so plenty of big P2P names sit outside it. A license doesn’t make loans safer, but it means a regulator checked the operator exists and follows rules. You can filter for regulated platforms in our platform directory.

First-rank mortgage

Collateral where you (via the platform) hold the first claim on a property if the borrower defaults. First rank means you get paid before anyone else from the sale proceeds. It’s the strongest collateral position in P2P real-estate lending, and the main pitch of platforms like EstateGuru. The honest caveat: recovery through courts takes years, and the property’s appraised value is an opinion, not a price.

Go & Grow style products

Pooled products with a capped, platform-set return and one-click withdrawal, named after Bondora’s flagship. You don’t pick loans; you hold a claim on a managed pool. The convenience is real and so is the trade: the cap means the platform keeps the upside, and the instant liquidity is a feature the platform can suspend in a crisis, exactly when everyone wants out at once.

Investor compensation scheme

The €20,000 protection regulated platforms mention, and the most misunderstood number in P2P. It covers broker failure: your assets vanishing because the investment firm collapses or commits fraud. It pays nothing, zero, when loans default or an originator goes bust. Those losses are investment risk, and they’re entirely yours. Anyone implying the scheme protects your returns is misleading ye.

LTV (loan-to-value)

The loan amount divided by the collateral’s appraised value. A 60% LTV means the property could sell for 40% below appraisal before your principal is touched. Lower is safer. The weak point is the V: appraisals are commissioned by people who want the deal to happen, and a 60% LTV against an optimistic valuation can be an 85% LTV against reality.

Notes (regulated)

Securities that bundle loan claims into regulated financial instruments, the structure Mintos moved to after getting its investment-firm license. Notes come with prospectuses, regulatory supervision, and investor compensation scheme coverage for broker failure. They do not change the underlying credit risk: if the originator behind the Notes fails, the wrapper is still wrapped around losses.

Provision fund

A pot of money the platform sets aside to cover defaulted loans, the older cousin of the buyback guarantee. The fund is discretionary on most platforms: payouts happen if the fund has money and the operator chooses to pay. In a serious downturn, the fund covers the first wave of defaults and then it’s empty. Treat it as a shock absorber, not a guarantee.

Recovery rate

The percentage of a defaulted loan you eventually get back through collections, collateral sales, or legal action. Platforms love quoting it, but timing is everything: 80% recovered over four years is a very different investment than the headline suggests. Always ask how long recoveries took, not just how much came back.

Secondary market

A marketplace within the platform where investors sell loans to each other before maturity. It’s your exit door, with two honest caveats: it only works when there are buyers, and in a panic everyone is a seller. Expect discounts when you need liquidity most, and check whether the platform charges a sale fee.

Skin in the game

The slice of each loan the originator must keep on its own books, typically 5–10%. The logic: an originator losing its own money on bad loans has an incentive to lend carefully. It’s a real alignment mechanism, but a thin one. An originator in trouble has bigger problems than its 5% slice, and skin in the game has never stopped a determined fraud.

Two-tier platform structure

The split between marketplaces and direct lenders. A marketplace (Mintos, PeerBerry) lists loans from external originators: you get diversification across lenders, plus a layer of separation between your money and the company that made the loan. A direct lender (Robocash, Viainvest, Esketit’s owners) funds its own group’s loans: simpler structure, but the platform, originator, and guarantor are all the same pocket. Neither is automatically safer. What matters is knowing which one you’re standing on, because it tells you whose balance sheet you’re actually betting on.