P2P Lending Glossary - 40 Terms Explained Simply

European P2P lending uses language borrowed from banking, securities law and structured finance. Retail investors encounter acronyms - ECSP, MiFID II, SPV - that platforms rarely explain in full. This glossary translates the 40 most common terms into investor-facing definitions, with numeric examples where helpful. Whether you are comparing platforms for beginners or debugging a return calculator mismatch, the terms below map the vocabulary of the asset class.

Core Terms A-C

Accrued Interest

Interest earned day-by-day on a loan but not yet paid to the investor's account. Most P2P platforms calculate interest daily and credit it monthly or at loan maturity; the accrued figure appears as a pending balance. On Maclear, for example, interest accrues daily on EUR 1,000 invested at 14.5 percent annual yields roughly EUR 0.40 per day, paid monthly.

Auto-Invest

An automated allocation tool that deploys idle cash into loans matching investor-defined criteria - minimum interest rate, maximum term, loan type, originator rating. Mintos, PeerBerry and Robocash offer auto-invest with granular filters; InRento does not, requiring manual selection of each property. Auto-invest reduces cash drag and is essential for portfolios above EUR 5,000 where manual reinvestment becomes impractical.

Buyback Guarantee

A contractual promise by a loan originator to repurchase a loan from investors if the borrower is more than X days late (typically 60). The originator pays the outstanding principal plus accrued interest; the investor exits at par. PeerBerry and Robocash attach buyback guarantees to most consumer loans, but the guarantee is only as strong as the originator's solvency - if the originator fails, the buyback lapses. Buyback guarantee does not eliminate credit risk; it shifts it from the borrower to the originator.

Buyback Obligation

Synonym for buyback guarantee in most contexts. Some platforms distinguish "obligation" (contractually binding) from "guarantee" (best-effort), but in practice both terms describe the same mechanism: the originator must repurchase delinquent loans at principal plus interest after a defined grace period. Investors should read the platform's loan agreement to confirm enforceability and jurisdiction.

Cash Drag

The opportunity cost of uninvested cash sitting in a P2P account earning zero return. If an investor holds EUR 500 idle for 30 days in an account otherwise yielding 12 percent, the cash drag costs roughly EUR 5 in foregone interest. Auto-invest minimises cash drag; manual investors mitigate it by depositing only when suitable loans are available or by using platforms with instant loan availability like Maclear.

Collateral

An asset pledged by the borrower to secure a loan, which the lender can seize and sell if the borrower defaults. Real estate is the most common collateral in European P2P: InRento loans are secured by first-rank mortgages on rental properties; Maclear SME loans often carry collateral in the form of invoices, inventory or guarantees. Collateral reduces loss-given-default but does not eliminate it - recovery depends on the asset's liquidity and the legal process in the borrower's jurisdiction.

Compound Interest

Interest earned on both the original principal and previously earned interest. In P2P lending, compound interest applies when monthly or quarterly interest payments are reinvested into new loans rather than withdrawn. An investor depositing EUR 10,000 at 12 percent simple annual interest earns EUR 1,200 in year one; with monthly compounding and reinvestment, the same rate yields EUR 1,268, because each month's interest earns interest in subsequent months. Platforms like Mintos with auto-invest enable automatic compounding.

Concentration Risk

The danger that too much of a portfolio depends on a single loan, borrower, originator, platform, country or asset type. A portfolio split EUR 1,000 each across ten originators on Mintos carries lower concentration risk than EUR 10,000 in loans from one originator. Diversified P2P portfolios typically hold 100-200 individual loans across 3-5 platforms; concentration in a single platform or originator is the leading cause of total-loss events in European P2P history.

Crowdfunding

The practice of raising small amounts of money from many people, typically via an online platform. Crowdfunding encompasses donation-based (Kickstarter), reward-based, equity-based and debt-based (crowdlending) models. In European regulation, crowdfunding usually refers to equity or quasi-equity investments in startups or property SPVs, while crowdlending refers to debt instruments. The EU's ECSP regime governs both.

Crowdlending

A subset of crowdfunding in which investors lend money to borrowers - consumers, SMEs, property developers - in exchange for interest payments. Crowdlending is synonymous with P2P lending in most European contexts, though purists reserve "P2P" for consumer-to-consumer loans and "crowdlending" for marketplace lending with institutional originators. Platforms like Capitalia and Crowdpear use the term crowdlending to describe their SME and real-estate loan models.

Terms D-I

Default

A borrower's failure to make a scheduled loan payment, typically defined as 90 days past due. Once a loan is declared in default, the platform or originator begins recovery proceedings - debt collection, asset seizure, legal action. Not all defaults result in total loss; some borrowers resume payments after restructuring, and secured loans may recover 40-80 percent of principal through collateral liquidation. Default rates on P2PScore show platform-by-platform default and recovery data.

Default Rate

The percentage of loans (by value or count) that enter default over a given period, usually expressed annually. A platform with EUR 100 million in outstanding loans and EUR 2 million in defaults over 12 months has a 2 percent default rate. Default rate alone does not determine net return - recovery rates and buyback guarantees matter equally. Maclear reported one default in its first three years, which was covered in full; EstateGuru has roughly 60 percent of its portfolio in recovery as of early 2026.

Diversification

Spreading capital across multiple loans, originators, platforms, geographies and asset types to reduce the impact of any single failure. A diversified EUR 10,000 P2P portfolio might allocate EUR 3,000 to Maclear Swiss SME loans, EUR 3,000 to InRento Baltic buy-to-let, EUR 2,000 to Mintos multi-originator notes and EUR 2,000 to Capitalia factoring. Diversification is the primary risk-management tool in P2P lending; this guide explains portfolio construction.

Due Diligence

The process of investigating a platform, loan originator or individual loan before investing. Retail due diligence includes checking the platform's regulatory status (ECSP, MiFID II or unregulated), reading audited financials, verifying originator solvency, reviewing loan documentation and reading independent reviews. P2PScore methodology performs monthly due diligence on 20 platforms; investors should supplement it by reading platform prospectuses and regulator registers.

ECSP

European Crowdfunding Service Provider, a licence introduced by the EU in November 2021 under Regulation 2020/1503. An ECSP may operate cross-border across all 27 EU member states under a single licence issued by one national regulator. InRento holds an ECSP licence from the Bank of Lithuania; Capitalia from Latvijas Banka; Crowdpear from the Bank of Lithuania. ECSP-licensed platforms must publish a Key Investment Information Sheet (KIIS), maintain own funds of EUR 25,000 or more, segregate client funds and undergo annual audits. ECSP does not provide investor compensation for borrower defaults.

First-Loss Capital

A tranche of capital - usually provided by the platform, originator or a public guarantor - that absorbs the first X percent of losses in a loan pool before retail investors suffer any loss. Capitalia benefits from a EUR 15 million first-loss guarantee provided by the European Investment Fund under the InvestEU programme, which covers the first 30 percent of defaults in eligible SME loans. First-loss capital materially reduces retail investor risk but does not eliminate it - if defaults exceed the first-loss amount, retail investors bear the excess.

Grace Period

The number of days a borrower may be late before a loan is marked delinquent or the buyback guarantee triggers. Most platforms define a grace period of 1-15 days for consumer loans and 30-60 days for business loans; loans become "late" after the grace period expires. Robocash triggers buyback at 60 days past due; Maclear declares default if a borrower misses two consecutive monthly payments without curing within 30 days.

Idle Cash

Synonym for uninvested cash in a P2P account. Idle cash earns zero return and creates cash drag. Platforms mitigate idle cash by offering instant-deploy auto-invest (Mintos, PeerBerry) or by funding loans the moment an investor deposits (Maclear, InRento).

Investor Compensation Scheme

A national fund that reimburses retail investors up to a capped amount (typically EUR 20,000 in the EU) if a regulated investment firm becomes insolvent and cannot return client assets. Mintos and Nectaro, both licensed under MiFID II, participate in their home-country investor compensation schemes (Latvia). Investor compensation does NOT cover borrower defaults or loan losses - it only protects against platform insolvency if client funds were not properly segregated. ECSP platforms and unregulated platforms carry no investor compensation.

Terms L-P

LTV (Loan-to-Value)

The ratio of a loan's principal to the appraised value of the underlying collateral, expressed as a percentage. A EUR 60,000 mortgage on a property valued at EUR 100,000 has 60 percent LTV. Lower LTV implies a larger equity cushion and lower loss-given-default. InRento buy-to-let loans average 60-70 percent LTV; EstateGuru development loans historically ran 65-75 percent LTV, though many are now in recovery with realised LTVs above 100 percent due to falling property values.

MiFID II

Markets in Financial Instruments Directive II, the EU legal framework governing investment firms and securities markets. A P2P platform holding a MiFID II licence (formally, an investment-firm licence) may broker transferable securities - bonds, notes, shares - and must comply with capital adequacy rules, client fund segregation, suitability assessments and reporting obligations. Mintos, Nectaro, Indemo, Twino and Debitum hold MiFID II licences from Latvijas Banka. MiFID II platforms participate in investor compensation schemes up to EUR 20,000 per investor, but compensation does not cover borrower defaults.

Loan Originator

A lending company that sources, underwrites and services loans, then sells fractional claims on those loans to P2P investors. The originator retains legal ownership of the borrower relationship and handles collections; the platform acts as broker or arranger. Mintos works with 60+ originators across Europe, Asia and Latin America; Robocash originates 100 percent of its loans in-house via subsidiaries. Originator quality and solvency are the primary drivers of realised return in multi-originator marketplaces.

Net Annual Return

The annualised percentage gain on invested capital after deducting platform fees, taxes (if withheld) and defaults but before personal income tax. If an investor deposits EUR 10,000, earns EUR 1,200 in interest, pays EUR 50 in platform fees and suffers EUR 150 in unrecovered defaults, the net annual return is (1,200 - 50 - 150) / 10,000 = 10 percent. Net annual return is a trailing metric; advertised returns on platform homepages are forward-looking and typically exclude future defaults.

Notes

Debt securities issued by a platform or SPV that represent fractional ownership of a loan or loan pool. Investors do not own the underlying loan directly; they own a note whose value tracks the performance of the loan. Mintos issues investment notes (since 2021); Nectaro and Lendermarket issue claim-assignment notes. Notes are transferable on a secondary market (if the platform provides one) and may qualify as securities under MiFID II.

P2P Lending

Peer-to-peer lending: a model in which individuals lend money to other individuals or businesses via an online platform, bypassing traditional banks. In Europe, most "P2P" platforms are actually marketplace lenders or crowdlending platforms where professional loan originators issue loans and retail investors buy fractional claims. True peer-to-peer lending - one retail investor funding one borrower - is rare; platforms like Maclear and InRento pool investor capital into single loans but retain the P2P label for branding. This guide explains the evolution of the term.

Platform Risk

The risk that a P2P platform becomes insolvent, halts operations, loses its licence or fails to return investor capital even if the underlying loans perform. Platform risk is distinct from credit risk (borrower default) and is mitigated by regulation (ECSP, MiFID II), fund segregation, transparent financials and contingency plans. Reinvest24 entered wind-down in 2024 amid regulator alerts, leaving investors dependent on asset liquidation; EstateGuru suspended new deposits in 2023 while restructuring. This guide lists red flags for platform risk.

Principal

The original amount of money lent, excluding interest. If an investor buys a EUR 100 loan at par, the principal is EUR 100; interest accrues on top. In amortising loans, each payment includes a portion of principal and a portion of interest; bullet loans repay principal in full at maturity. Principal is at risk - borrower defaults or platform insolvency can result in partial or total principal loss.

Prospectus

A legal document that describes a loan, bond or investment offering, including risk factors, borrower details, use of proceeds, repayment terms and the platform's role. EU regulation requires ECSP platforms to provide a Key Investment Information Sheet (KIIS) for each project; MiFID II platforms must produce a prospectus for public securities offerings above EUR 1 million. Investors should read prospectuses before committing capital - they contain entity-attribute-value data essential for due diligence.

Terms R-S

Realised Return

The actual annualised gain or loss on a portfolio of closed positions, calculated after all principal and interest have been received or written off. Realised return accounts for defaults, early repayments and fees. Indemo reports a 23 percent realised return on its 13 completed mortgage deals as of early 2026; Nectaro delivered 14.91 percent realised return in 2025. Realised return is the gold-standard metric for comparing platforms - advertised yields mean nothing until loans close.

Recovery

The percentage of a defaulted loan's principal and interest that is ultimately collected through debt collection, collateral liquidation, legal judgement or borrower restructuring. A loan with EUR 10,000 outstanding that recovers EUR 4,000 has a 40 percent recovery rate. Recovery depends on collateral quality, jurisdiction, legal costs and time. InRento has zero reported capital losses across five years, implying 100 percent recovery on any delinquent loans; EstateGuru is recovering an estimated 40-60 percent on its defaulted property loans.

Regulated vs Unregulated

A regulated platform holds a licence from a national financial authority - ECSP, MiFID II or a Swiss SRO registration - and must comply with capital, conduct and reporting rules. An unregulated platform operates without direct financial supervision, though it may still be subject to consumer protection or AML law. Maclear is regulated by a FINMA-recognised Swiss SRO; Mintos under MiFID II; InRento under ECSP; Robocash and Hive5 are unregulated. Regulation reduces platform risk but does not eliminate credit risk - borrower defaults happen on regulated platforms.

Secondary Market

A marketplace where investors can sell their loan claims or notes to other investors before maturity, providing liquidity. Mintos operates an active secondary market with EUR 10+ million in daily turnover; PeerBerry launched a secondary market in 2026; InRento does not offer one - investors must hold buy-to-let loans for 12-24 months until payout. Secondary markets trade at discounts (if demand is weak) or premiums (if the loan is high-yield and low-risk); transaction fees typically range 0.5-1.5 percent.

Secured Loan

A loan backed by collateral - real estate, vehicles, invoices, inventory - that the lender can seize if the borrower defaults. Secured loans carry lower risk and lower interest rates than unsecured loans. InRento loans are secured by first-rank mortgages on rental properties; Maclear SME loans are often secured by business assets or personal guarantees. Secured does not mean safe - if collateral value falls below the loan amount (LTV above 100 percent) or legal recovery is costly, investors may still lose capital.

SME Lending

Lending to small and medium enterprises - companies with fewer than 250 employees and annual revenue below EUR 50 million. SME loans finance working capital, inventory, receivables or equipment; typical terms are 3-24 months at 8-18 percent interest. Maclear, Capitalia and Crowdpear specialise in SME lending; Mintos includes SME loans in its diversified marketplace. SME loans carry higher default risk than consumer loans but often have collateral or guarantees that improve recovery.

SPV (Special Purpose Vehicle)

A legal entity created solely to hold one asset or pool of assets, isolating it from the parent company's balance sheet. In real-estate crowdfunding, each property is typically held in an SPV - investors buy equity or debt in the SPV, not direct ownership of the property. InRento structures buy-to-let investments as loans to SPVs that own rental apartments; Reinvest24 used equity SPVs. SPVs provide bankruptcy remoteness - if the platform fails, the SPV's assets remain separate - but add legal complexity and costs.

Skin in the Game

A requirement or practice where the platform, originator or project sponsor invests its own capital alongside retail investors, aligning incentives. Capitalia co-invests 5-10 percent of each loan; Maclear claims skin in the game via its lending entity's equity but does not disclose co-investment percentages. Skin in the game reduces moral hazard - if the sponsor loses money when retail investors do, the sponsor has an incentive to underwrite carefully.

SRO (Self-Regulatory Organisation)

A private-sector body that enforces rules on its member firms under oversight from a national regulator. In Switzerland, SROs recognised by FINMA supervise financial intermediaries for anti-money-laundering compliance. Maclear is registered with a FINMA-recognised SRO, which imposes AML due diligence, reporting and audit obligations but does not regulate solvency, capital adequacy or investor compensation. Swiss SRO registration is not equivalent to a banking or securities licence.

Terms X-Z

XIRR (Extended Internal Rate of Return)

A calculation method that accounts for irregular cash flows - deposits, withdrawals, interest payments, defaults - to produce an annualised return figure. XIRR is more accurate than simple interest for P2P portfolios where capital is added or withdrawn over time. If an investor deposits EUR 5,000 in January, adds EUR 2,000 in June, withdraws EUR 1,000 in September and ends the year with EUR 6,500 including interest, XIRR calculates the effective annual return by solving for the discount rate that equates all cash flows to present value. Most P2P platforms display XIRR in account dashboards; investors can also compute it in Excel using the =XIRR() function.

Yield

The annual income generated by an investment, expressed as a percentage of the principal. In P2P lending, yield typically means gross interest rate before fees and defaults. A EUR 1,000 loan at 12 percent annual yield pays EUR 120 in interest over 12 months. Advertised yield is not the same as net annual return - the latter subtracts platform fees, defaults and cash drag. Investors should compare realised return, not advertised yield, when evaluating platforms.

Wind-Down

A controlled process in which a platform ceases new business, repays existing investors as loans mature or are sold, and eventually closes. Wind-down is preferable to sudden insolvency because it gives investors time to recover capital. Reinvest24 entered wind-down in 2024 after regulator alerts; EstateGuru entered a restructuring phase in 2023 that resembles a slow wind-down. Investors in wind-down platforms should expect delayed withdrawals, reduced liquidity and potential principal losses if assets cannot be liquidated at book value.

Using This Glossary

The 40 terms above cover 95 percent of the vocabulary you will encounter when comparing European P2P lending platforms, reading investment guides or interpreting platform prospectuses. Three patterns recur across the definitions: (1) regulation does not eliminate credit risk - ECSP and MiFID II licences govern platform conduct, not borrower solvency; (2) advertised yields differ from realised returns - defaults, fees and cash drag erode gross figures; (3) concentration is the enemy - single-platform, single-originator or single-loan portfolios amplify the impact of any failure.

When you encounter an unfamiliar term on a platform homepage or in a loan prospectus, return to this glossary for a plain-English definition grounded in real European market practice. For deeper dives into specific mechanisms, see our regulation explainer, diversification guide and default-rate tracker.