Savings account or crowdlending: where might it make more sense to invest your money?

However, they serve quite different purposes.

An interest-bearing account is mainly intended to keep money available while earning interest. Crowdlending, by contrast, involves using capital to finance loans and taking on the risk associated with the borrowers.

For this reason, the question should not only be which one offers a higher return, but rather what you need the money for, how long you can keep it invested and what level of risk you are willing to take on.

What is an interest-bearing account?

An interest-bearing account is a bank account that pays interest on the deposited balance.

Its main appeal is that it combines remuneration with a high degree of availability of the money. The client can keep the balance in the account and, depending on the institution's terms, access it when needed.

The return is usually expressed as an APR, although conditions may vary considerably between institutions.

Some accounts may offer an interest rate during a promotional period, cap the balance that earns remuneration, or require certain conditions, such as setting up direct deposit of income or taking out other products.

Therefore, it is not enough to look at the advertised percentage. It is also necessary to check up to what amount it applies, for how long, and which conditions must be met.

What is crowdlending?

Crowdlending allows several investors to take part in financing loans through a platform.

In the case of business loans, investors' money is used to finance companies that need capital. In return, investors receive interest according to the terms established for each transaction.

Unlike an interest-bearing account, the money is no longer simply deposited and becomes exposed to the borrower's credit risk.

If the company meets its obligations, the investor receives the scheduled payments. If it experiences financial difficulties, delays, recovery proceedings or losses may occur.

Crowdlending should therefore be regarded as an investment, not as a substitute for a bank account for keeping money available.

Interest-bearing account vs. crowdlending: main differences

Feature Interest-bearing account Crowdlending

Main function

Maintain liquidity and earn interest Invest in loans

Main risk

Risk of the institution within the applicable framework

Borrower credit risk

Availability Generally high Depends on the term and on available liquidity

Return Depends on the institution and its conditions

Depends on each loan

Term Normally flexible Determined by each transaction

Diversification Does not depend on multiple borrowers Can be diversified across different loans

Minimum capital Depends on the institution Depends on the platform

Protection Eligible deposits subject to the applicable guarantee scheme

Not equivalent to a deposit guarantee

This last difference is particularly important.

The fact that an interest-bearing account and a crowdlending investment both pay interest does not mean that they have the same level of protection.

Return: which option can offer more?

There is no universal figure for either of the two alternatives.

Interest-bearing accounts compete mainly by offering an attractive interest rate on the balance. The return may vary with interest rates and with each bank's commercial policy.

In addition, some offers are limited to certain amounts or periods.

In crowdlending, the interest rate depends on the characteristics of the loan and the risk associated with the borrower.

In general, an investment that offers a higher return is taking on a different level of risk. For this reason, simply comparing 3% on an account with 8% on a P2P loan does not make it possible to determine which is more advantageous.

The 8% should not be interpreted as an improved version of the 3%, but as a return associated with a different type of investment.

Risk and protection of funds

This is probably the most important difference.

Interest-bearing account

Money deposited in a bank account is subject to the deposit protection regime applicable to the institution and the country in question.

In Spain, the Deposit Guarantee Fund generally covers up to 100.000 euros per depositor and institution for guaranteed deposits, subject to the conditions established by the applicable regulations.

This provides a protection that does not exist in the same way in an investment in private loans.

Crowdlending

In crowdlending, the main risk is that the borrower may be unable to repay the money.

A platform may carry out analysis processes, set selection criteria, request collateral or have recovery mechanisms in place, but none of these elements completely eliminates the risk.

Therefore, an investment in crowdlending may suffer a partial or total loss of capital.

This difference means that an interest-bearing account may be more appropriate for money that the investor needs to keep available or for a liquidity reserve, whereas crowdlending requires knowingly assuming a higher level of risk.

Liquidity and availability of capital

An interest-bearing account usually offers much greater availability of the money.

The client may use the balance to make payments, transfers or withdrawals in accordance with the conditions of the account.

In crowdlending, by contrast, the capital is usually committed for the term of the loan.

Some platforms offer secondary markets that allow you to attempt to sell an investment before it matures. However, the existence of a secondary market does not guarantee that a buyer will appear, nor that the sale can be completed immediately or at the desired price.

Therefore, if there is a high probability that you will need the money in the coming weeks or months, committing it to private loans may not be appropriate.

Taxation

The interest earned through an interest-bearing account and the interest generated by a crowdlending investment both have tax implications, although the specific treatment depends on the nature of the return and on the taxpayer's circumstances.

Interest from a bank account must be taken into account in the income tax return where applicable.

In crowdlending, the interest earned on loans must also be declared in accordance with the applicable tax regulations.

In addition, any losses arising from defaulted loans may be subject to specific tax treatment.

For this reason, it is not advisable to compare gross returns alone. Taxation, fees and potential losses may also be relevant in determining the actual result of an investment.

How much money do you need to start?

With an interest-bearing account, it is normally not necessary to have a large amount of capital to start earning interest, although the terms of each account may set minimums or limits on the balance that earns interest.

In crowdlending, the minimum amount depends on the platform and on the characteristics of each project.

One advantage of crowdlending is that some platforms allow you to start with relatively small amounts. This can make it easier to build a portfolio gradually.

But the aim should not simply be to invest the smallest amount possible. If more capital is available, spreading it across different loans can reduce dependence on a single borrower.

Which objective can each alternative serve?

The difference between the two options is easier to understand by considering the purpose of the money.

An interest-bearing account may make sense for:

• Emergency fund.
• Money set aside for upcoming expenses.
• Savings for a short-term purchase.
• Capital that one wishes to keep available.
• Money for which no investment decision has yet been made.

In these cases, liquidity may be more important than obtaining the highest possible return.

Crowdlending may be suitable for:

• A portion of capital allocated to investment.
• Investors who accept credit risk.
• People seeking to diversify beyond traditional assets.
• Capital that is not needed immediately.
• Investors who wish to earn income through interest.

The key is not to confuse the two objectives.

Can an interest-bearing account and crowdlending be combined?

Yes. In fact, they can complement each other.

An investor may keep part of their assets in an interest-bearing account to cover their liquidity needs and use another part for investments with a longer time horizon.

For example, consider a person who has 10.000 euros.

Instead of considering whether to place the 10.000 euros exclusively in an interest-bearing account or exclusively in crowdlending, they could first determine how much they need to keep liquid and how much they are willing to invest.

A hypothetical allocation could be:

• 4.000 € in an interest-bearing account as a liquidity reserve.
• 3.000 € in fixed-income investments or other assets.
• 2.000 € distributed among different P2P loans.
• 1.000 € pending allocation or intended for other purposes.

There is no universally correct allocation. The example merely shows that both alternatives can serve different functions within the same strategy.

Which option is better?

It depends on the purpose of the money.

If the priority is to keep capital available and reduce risk, an interest-bearing account may be more suitable.

If the objective is to invest in exchange for a potentially higher return and you accept taking on credit risk and lower liquidity, crowdlending may make sense as part of a diversified portfolio.

It may also be the case that the investor does not have to choose exclusively one of the two.

A financial strategy can combine liquidity and return by using each instrument for the objective for which it is most suitable.

Five questions before choosing

Before deciding where to place your money, it may be useful to answer these five questions:

1. When will I need this money? 2. How much risk am I willing to take on? 3. Do I need to have access to the capital immediately? 4. What return will I obtain after taxes and costs? 5. What percentage of my assets does this investment represent?

These questions help to avoid one of the most common mistakes: choosing an investment solely because it offers a higher interest rate.

Conclusion

A savings account and crowdlending can both generate income on capital, but they do not serve the same purpose.

A savings account is primarily oriented towards liquidity, availability and remuneration of savings, whereas crowdlending is an investment in loans that entails credit risk and lower availability of capital.

For this reason, comparing returns alone can be misleading. An account may offer a lower interest rate, but provide far greater availability of the money and be covered by the applicable deposit guarantee scheme. Crowdlending may offer a higher potential return, but in exchange for taking on additional risks.

The decision should not be reduced to choosing one option over the other. For many investors, the more relevant question is to determine what amount they need to keep liquid and what portion of their assets they can allocate to investments with higher risk and a longer time horizon.

In that context, a savings account and crowdlending can be complementary tools within a diversified portfolio, provided that the investor understands the differences and takes on only the risks they can afford.

The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax, or legal advice. Peer-to-peer (P2P) lending and crowdlending investments carry a risk of partial or total loss of capital. Past performance does not predict future results. Liquidity on a secondary market is not guaranteed. Readers are encouraged to conduct their own research and consult qualified advisors before making any financial decisions. The availability of products and services may be restricted in certain jurisdictions.